Khaled Ali: Privatisation has stolen Egypt from its people

Khaled Ali: Privatisation has stolen Egypt from its people
Q&A: Prominent Egyptian lawyer and activist Khaled Ali talks exclusively about the effects of privatisation in Egypt, and its apparent return under the rule of Sisi.
8 min read
23 January, 2015
Khaled Ali: Workers spent their lives building Egypt, only to see it sold off [Getty]

Against a backdrop of instability and revolt, Egypt has been gradually selling off its state assets, promoting neo-liberal policies and cutting benefits such as fuel and food subsidies.

On the fourth anniversary of the 2011 revolution, al-Araby al-Jadeed spoke to Khaled Ali, a prominent Egyptian lawyer who has campaigned against privatisation and is fighting legal battles to overturn the sale of state-owned factories.

Al-Araby al-Jadeed: What effect has privatisation had on Egypt?

Khaled Ali: Politically, I am opposed to any privatisation scheme. It does not benefit the people of Egypt - it merely transfers wealth to those who are favoured by the elite. It adds no value to the Egyptian economy. Indeed, many privatised firms have cut worker numbers.

Privatisation has seen the dismantling of large sections of Egypt's industrial infrastructure, with industrial areas being transformed into real estate and residential zones, which are then sold on to private buyers.

On the legal level, privatisation and corruption go hand in hand in Egypt. It has been so blatant that judges presiding over legal challenges to privatisation have written judgments which are tantamount to a notice for all regulatory authorities to investigate the corruption.

Privatised companies introduced contracts that failed to guarantee workers' rights and jobs. Some sell-offs took place without auction or tender. Some companies were valued way below their market value. Investors have been able to close down factories and sack the workforce.

An extreme example is the acquisition by Saudi Prince al-Walid bin Talal of about 125,000 acres of land at a price of $6.75 per acre. The sale contract gave him the right to bring in foreign labourers, and to have access to water and electricity at the same tariffs as ordinary citizens.

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The contract also exempted his crop seed from quarantine regulations, and allowed him to cultivate any crop he wanted regardless of local market needs. He was also allowed to export everything that was produced.

In my opinion, the state should have insisted on a timetable for land cultivation, the mandatory employment of 90 percent Egyptian staff, and a requirement for half of what he grew to match what the local market needed.

AAAJ: The state has argued that it was impossible to implement verdicts requiring the recovery of privatised concerns on the grounds that their assets had either been transferred to multiple owners or no longer existed. How would you respond to that?

This claim is disingenuous. Many rulings for the repossession of companies have been implemented, including the Omar Effendi case and the Arab Company for International Trade. The workers of the Tanta Flax and Oil Company also announced they were ready to run the company if the government reinstated them.

     Privatisation has been chaotic and hugely corrupt with no clear political or economic objectives beyond selling off the state's assets to enrich the ruling elite.

The case of Nubaseed refutes the government's claims. This seed-producing company was sold to a Saudi investor who fled after the minister of agriculture sequestered his assets, leaving the company with $3 in the bank and debts to the utilities and workers wages overdue. The minister allowed the workers to run the company and, within a year, their wages were up to date and the company's debts had been repaid. And then the ministry of agriculture went and handed the company back to the same investor with $2.7m in its accounts that the workers had earned.

AAAJ: In your opinion, who has paid the cost of privatisation?

The workers and the people in general have footed the bill. Privatisation has been chaotic and hugely corrupt with no clear political or economic objectives beyond selling off the state's assets to enrich the ruling elite.

Egyptian workers who spent their lives building factories and public sector institutions, with a degree of job security and decent labour relations, and who gained some financial and social entitlements - those workers became vulnerable to arbitrary dismissal. Their rights, and many of their jobs, were soon lost.

And the Egyptian people have lost an industrial and services base that used to provide them with goods and services at reasonable prices. Since privatisation they have fallen prey to inflation in the prices of these goods and services, now monopolised by private investors motivated by profit.

AAAJ: You have brought many lawsuits before the administrative court to cancel privatisation deals. What is the idea behind this?

Recovering factories from privatisation is a form of social and political resistance. The resistance was launched by labour activist and lawyer Nabil al-Hilali back in 1991, who contested the public sector enterprise law before the constitutional court.

This law was the first step on the path to privatisation. It changed the status of factories and enterprises from public property to private assets owned by the state's holding companies. The court rejected the appeal because it challenged the idea of privatisation in principle.

We do not dispute in court the validity of privatisation as a principle, but raise cases of corruption that accompany privatisation. This gets sale contracts cancelled and also challenges the politics of privatisation.

AAAJ: How were private sector companies sold and dismantled by the Mubarak regime?

Privatisation clearly showed that corruption in Egypt was not down to an individual, but that it was systematic. The state, after the public sector enterprise law was passed, established the so-called ministerial committee for privatisation. It mission was to value the assets of what was being sold. The committee formed a number of valuation subcommittees and placed a number of conditions that they had to adhere to during the process of asset valuation. These included:

1. Machinery, vehicles and equipment should be valued at "book value" - value at the time of purchase minus depreciation. But some equipment in good condition was simply valued at zero and given away free.

 Land values were supposed to be determined according to the price per square metre in the nearest industrial city. Land owned by the Tanta Flax and Oil Company near Tanta was valued at £3.40 per sq/m, when other land close to the site was valued at more than $1,300 per sq/m. Many assets were simply sold at the price of dirt.

Khaled Ali
Khaled Ali is a politician, lawyer, activist and advocate against corruption and for workers' rights. He was born on 26 February 1972 in Dakahlia. He completed his law degree at Zagazig University in 1995.

Ali was the former head of the Egyptian centre for economic and social rights and a founding member of the Hisham Mubarak Law Centre. Ali has successfully fought the privatisation of land and companies during the Mubarak era, and in 2010 forced the government to set a minimum wage that would cover the costs of living  

During the 2011 revolution, Ali supported strikes and spoke on behalf of protesters. He was arrested along with other members of the Hisham Mubarak centre during a police raid on 3 February 2011. After Mubarak's fall, Ali represented protesters tried by military tribunals during the SCAF era.

Ali was the youngest candidate in the 2012 presidential elections, basing his platform on "social justice" and the restoration of public property sold by the Mubarak regime in corrupt conditions. He would advocate stronger opposition to the Israeli occupation of Palestine and build business ties with regional powers such as Iran.

Ali rejected the 2014 constitution and intended to run for president in 2014. However he withdrew in March, describing the elections that brought Abdel Fattah al-Sisi to power as a ‘farce’.

The government did not stop there. The law required assets to be auctioned. Many were just sold. As a result, the true value of assets was twice undermined.

AAAJ: How many lawsuits have you filed for the recovery of companies?

Eight major cases have been to court and been ruled on. They include Omar Effendi, Steam Boilers, Tanta Flax, Shibin Textiles, Nile Cotton Ginning and the Arab Company for International Trade). Twenty more cases are pending.

AAAJ: Services such as water and transport have recently been converted from public assets to private ones held by the state. Are they being targeted for privatisation?

Definitely. The goal is to pave the way for privatising public services and eliminating subsidies that benefit poorer Egyptians. They will bear the costs. Price rises are definitive proof that the current regime has this goal.

After the Mubarak regime had finished privatising the country's industrial and commercial base, it wanted to turn to the public services and utilities. Credit should go to the 25 January revolution for stopping the privatisation train, albeit temporarily.

The regime of Abdel Fattah al-Sisi is resuming Mubarak's programme. A law introduced last year seeks to prevent workers and citizens appealing against privitisation deals.
There is also a new investment law, which gives the government the right to return companies subject to repossession orders back to private investors, which is clearly meant to circumvent court orders.

AAAJ: How do you perceive the attitudes of political parties and the role of workers in countering privatisation?

Hosni Mubarak himself spoke of "social justice", as does Sisi, but this is just rhetoric.

The workers have resisted privatisation since its inception. They have gone on strike and staged protests to roll back this disastrous project. And the workers are also plaintiffs in the lawsuits brought before the courts to cancel corrupt sales contracts.

Their attendance at the hearings is a crucial factor in success, as they can deliver their message more potently to the courts.

In other words, workers' resistance has taken two forms: struggle on the shop floor and in the courtroom.

And I'll end by saying that the present regime's insistence on reviving the privatisation programme and other Mubarak-era policies will increase social tension, which was one of the direct causes of the January revolution.