"Public business companies in FY 2007/08 achieved a net profit of about EGP 5.2 billion within the State-owned Asset Management Program after their net loss reached EGP 1.3 billion on June 30, 2003," the Minister of Investment, Dr. Mahmoud Mohieldin said .
Investments implemented between July 2004 and June 30, 2009 neared EGP 14 billion. They went to several sectors, including but not limited to hotel development, chemical industries, pharmaceuticals, metallurgical industries and consumption outlets, added the minister.
"Public business companies' historical debt, which hit EGP 32 billion on June 30, 2004, slumped to EGP 8 billion on June 30, 2009 and EGP 4 billion on Dec. 31, 2009," Dr. Mohieldin said.
The minister was answering an urgent question at the People's Assembly (PA) on Mon., March 8 evening session, regarding the situation at Omar Effendi Co. and the investor's commitment to the terms of the contract.
"It is planned to fully settle all debts to public banks this year," Dr. Mohieldin noted.
Profits of as many as 50 public business firms increased in spite of the global financial crisis, such as Eastern Tobacco, El Nasr Mining, National Cement, Egyptian Pharmaceutical Trading, the three container handling companies of Alexandria, Port Said and Damietta, Egyptian Contracting "Mokhtar Ibrahim", Hassan Allam and El Nasr Housing & Construction.
"Disputes between Omar Effendi's investor and the concerned holding company are being considered by the Cairo Regional Center for International Commercial Arbitration (CRCICA) under the contract terms," the minister said.
Contract parties had agreed their disputes over any of the contract terms should be resolved through arbitration, to be held in Cairo in accordance with the Egyptian Arbitration Law.
The minister said the buyer had raised an arbitration claim No. 583 of 2008 before the CRCICA. In response, the National Co. for Construction & Development (NCCD) raised a counterclaim demanding termination of the contract.
He said, "The Arbitration Board has not settled the NCCD's claim yet."
Many points raised about the claim being examined by the CRCICA had already been answered at a previous PA session that debated a number of quests for notification in June and April 2007. They had also been answered during the joint committee of PA's Economic Affairs and Plan and Budget Committees formed exclusively to consider the issue.
"There are no secrets in Omar Effendi's sale contract," Dr. Mohieldin told the session. "All sale relevant documents were shown to the PA. A copy of the company's 9-volume white book was obtained by the PA's Secretariat, to be added to all other documents related to the State-owned Asset Management Program.
He said those documents are accessible by all bodies concerned when completed.
"Although the company was put up for sale several times in 1999, 2000 and 2005, it remains unsold because the offer was less than the expected price," he said.
"Since the contract was signed and the company's ownership was transferred to the investor, the company became a private company under Law 159 of 1981. The value of selling 90% of the company's shares (EGP 589.4 million) was higher than the expected value of selling 100% of shares, an assessment approved after being studied by the committee formed under Article 19 of Law 203 of 199," Dr. Mohieldin said.
"The value of the deal (EGP 589.4 million) was paid three years ago. Taking into account the current average interest rates (about 9%), this simply means that this sum makes a return of EGP 53 million a year, or EGP 159 million during the past three years," he noted.
Omar Effendi had been making a loss for many years. Although it made about EGP 2-million profit in 2004/05, this small profit was considered a loss, given its great business and assets. In fact, the company made a loss of about EGP 750,000 in the abovementioned year.
The Ministry of Investment and the Holding Company for Tourism and Cinema (HOTAC) have been making great efforts to develop and restructure Omar Effendi's sister companies, including the four internal trade companies. Moreover, some EGP 16 million was invested in one year (2008/09) and these companies' debts to banks decreased from EGP 757 million on June 30, 2006 to EGP 51 million on June 30, 2009. However, the four companies still suffer a large cumulative budget deficit, a decline in sales and revenues, a drop in market share, and cumulative losses that have negatively affected their property rights.
"These companies represent a small part of the public business companies whose performance has been significantly developed within the framework of the State-owned Asset Management Program, despite the global financial crisis. This has been achieved thanks to the injection of new investments, the settlement of historical debts, and the efforts made to restructure these companies.
"Some 90 percent of the Ministry of Investment-affiliated companies' leadership has been changed," Dr. Mohieldin said.