Economic system in Egypt :: essays research papers

THE ECONOMIC SYSTEM IN EGYPT PRIVATE SECTOR: Ready for action As Egypt is known for it’s mixed economic system ,Compared with other emerging markets, Egypt's private sector is tiny. The public sector still accounts for almost 70 per cent of GDP despite the fact that hundreds of public enterprises have been wholly or partly privatised during the past four years. Judging, however, by the rapid growth of some of the country's largest family-owned businesses, this is unlikely to hold true five years from now. Raouf Ghabbour, chairman of Ghabbour Group, a family business and the country's largest assembler and distributor of motor vehicles, says there are hundreds of medium-sized companies which are growing fast enough to qualify for joint-stock status within three or four years. Ghabbour Group is one of only a dozen or so unlisted private sector companies with a turnover of more than EÂ £1bn. This is considered a minimum threshold for a company to launch a successful public listing. "Our turnover has been growing at about 25 per cent a year this decade," says Mr Ghabbour. "There are countless small and medium-sized companies with this kind of growth rate." Much like Orascom, Egypt's largest family-owned group, which has interests ranging from tourism to telecoms separated into several publicly listed companies, Ghabbour has been converted to the benefits of going public. The car assembler, which also has a growing consumer loan subsidiary, hopes to offer 10 to 15 per cent of its equity in an initial public offering later this year. Others, including IGI, a diversified family-owned group with interests in manufacturing, dairy farming and petroleum, are thinking along similar lines. "There are probably about 10 or 12 family companies with similar plans," says Khaled Sheta, chief executive of International Group for Investment. "All of them will be quoted in a year or two from now." Mr Sheta provides justification for such a move. "Opening your books to the public acts as a good business discipline on managers and enables you to value your assets more accurately," he says. It is also, of course, a handy way of raising capital without having to cede majority control of the company. Indeed, for the few that have achieved genuine nation-wide market share in their industries, there is little choice but to go public or offer stakes to strategic investors if they want to continue expanding. Being so small in number, companies such as Ghabbour and Mansour, which has the Coca-Cola and McDonald's franchise in Egypt, are inevitably bumping up against credit limits to their banks.