CAIRO: Egypt's announcement that it is to sell off 80 percent of its third-largest public-sector bank, Banque du Caire, has revived old fears that privatization is heralding the return of colonialism. "Selling this bank will bring back the era of foreign capitulations," independent MP Mustafa Bakri said at a meeting of Parliament's banking committee, joining a rising chorus of discontent in the private sector following the government's July 9 decision.
Newspapers since then have been filled with condemnations by employee unions and stories of panicked depositors rushing to withdraw funds from the bank's 220 branches.
Despite international praise for Egypt's privatization program, launched in 1991, it has also been criticized by opposition leaders for selling off the country's wealth at cut-rate prices in sweetheart deals to regime cronies.
The issue of the banks is especially sensitive.
"There is a lot of nationalist sentiment, because the [state-owned] National Bank of Egypt, Banque Misr and Banque du Caire are all landmarks," Hatem Alaa, a banking analyst with HC Securities, told AFP.
Banque Misr, the first nationally owned financial institution, laid the foundations for Egypt's quasi-independence from Britain in 1922 when, two years earlier, it was established by the nationalist economist Talaat Harb. The bank helped build the country's industrial base until the British-run National Bank of Egypt took it over during World War II.
The socialist-minded government began nationalizing the banking sector in the 1950's, and most state-owned banks were left untouched during the wave of privatization of public-sector assets that began when late-President Anwar Sadat initiated his economic infitah in the 1970s.
Economists have advised the government to privatize some of its public-sector banks which have been plagued by under-qualified workforces, massive nonperforming loans, and antiquated operational procedures.
The price tag for restructuring Banque du Caire is estimated at $1.6 billion.
"They say that around 73 percent of the bank's loan portfolio is nonperforming, but the bank hasn't released financials for quite some time," said Alaa, adding, "It has its problems."
Egypt's Business Monthly journal has estimated the bad loans, made in the profligate 1990s mostly to private businessmen who later defaulted and fled the country, to be in the neighborhood of $2.1 billion.
The decision to sell was also helped by last year's sale of 80 percent of Bank of Alexandria which netted the government $1.6 billion and underscored the international appetite for banking sector assets.
The government hopes to raise a similar sum with the sale of Banque du Caire.
"The Central Bank is not offering new licenses, so the only way to enter the market is to buy up an existing bank," said Alaa.
Egypt's privatization program, stalled by a recession for much of the late 1990s and early 2000s, received a shot in the arm from the 2004 reform-minded Cabinet of Prime Minister Ahmad Nazif whose policies have doubled the annual growth rate to 7 percent in the last few years.
The rest of the world has taken notice and the Organization of Economic Cooperation and Development earlier this month gave Egypt's investment environment a glowing report.
"Foreign-direct-investment inflows increased 12-fold between 2001 and 2006. They reached $9 billion in the first three quarters of its 2007 fiscal year, up from just over half a billion in 2001," the OECD said on its Web site.
But increased foreign investment has yet to trickle down to most Egyptians, who continue to suffer from high unemployment and inflation rates - and also remain highly suspicious of foreign influence on the economy.
"I've never heard of a foreign bank entering into investment projects or giving loans to small projects," scoffed ruling party MP Sherine Ahmad Fouad.
"Foreign banks, unfortunately, are just out for quick profit and don't concern themselves with the other matters."
Article in Daily Star (Beirut)