* State holding company revenue saw rapid growth
* Net profit grew by cumulative 334% to 2018/19
* World Bank says SOEs distorting market outcomes
CAIRO, Jan 19 (Reuters) - Egypt's state companies have been
enjoying robust earnings, official data shows, acting as a
growth driver and eclipsing the private sector despite
IMF-inspired reforms to restructure the economy.
Data published for the first time by the finance ministry
gives a glimpse of how numerous state companies have prospered
over the last few years, while investment in the private sector
Revenue at 17 non-oil, state-run holding companies more than
doubled over three years to 60.64 billion Egyptian pounds in 2018/19, according to Reuters calculations. The
calculations were based on the companies' latest available
results, published on the finance ministry's website late last
Net profit after tax at the 17 holding companies - which
together control about 180 smaller companies - more than
quadrupled over the three-year period, the data shows.
Egypt's economy was growing at nearly 6% before COVID-19
struck and economists say state-led activity has helped cushion
the blow from the pandemic.
By contrast, private-sector activity as a whole - excluding
the oil sector - expanded in only five of the 36 months from
July 2016 to June 2019, according to IHS Markit's Purchasing
Managers' Index (PMI).
Egyptian officials say they are working to boost the private
sector for long-term growth after stabilising the economy and
implementing widely praised reforms backed by the International
Monetary Fund (IMF) that included devaluing the currency,
removing most energy subsidies and imposing a value-added tax.
However, last month the World Bank said state-owned
enterprises (SOEs) often receive special tax exemptions and
enjoy a regulatory environment that favours incumbents, causing
private investors to shy away.
Foreign direct investment in Egypt rose to $8.24 billion in
2018/19 from $6.93 billion in 2015/16, according to central bank
figures, but much of this was in the thriving oil and gas
Egypt has not attracted the strong private investment that
would help reduce poverty and absorb an estimated 800,000
workers entering the labour force every year, the World Bank
said in its December report.
"The widespread presence of SOEs across the economy affects
competition and distorts market outcomes," the World Bank said.
As part of plans to reform state enterprises, Minister of
Public Enterprises Hesham Tawfik announced in early 2018 a
programme to sell minority stakes in nearly two dozen companies.
Those sales have been delayed repeatedly by market downturns
and more recently by the coronavirus pandemic.
Tawfik did not respond to a request for comment.
The finance ministry published its data on state enterprises
as a benchmark requirement under a $5.2 billion Standby
Arrangement with the International Monetary Fund (IMF) signed in
While there are still some state enterprises making losses,
the finance ministry data showed a trend of swelling earnings
The data shows that the cumulative revenue of 46 non-oil
economic authorities, including the Suez Canal Authority, the
Postal Authority and the loss-making Railway Authority, rose by
38.2% in the two years to June 2019.
"To raise your revenue by the margins (being seen by some
state companies) I suspect would require a deliberate injection
of cash or other help by the state," said Timothy Kaldas, a
non-resident fellow at the Tahrir Institute for Middle East
"This indicates that the government is doubling down on this
sort of regime-led capitalism beyond the security sector."
The finance ministry did not immediately respond to a
request for comment on whether it was providing more support for
A finance ministry spokeswoman, however, said:
"The government plans to allow the private sector to manage
several SOEs on behalf of the public sector in the
transportation, tourism and housing sectors."
Together the non-oil state holding companies and economic
authorities accounted for about 5.6% of GDP in 2018/19.
Other state companies that saw a surge in profit between
2015/16 and 2018/19 include the two main state banks and Telecom
Egypt, according to the finance ministry data, as well
as construction giant Arab Contractors whose revenue climbed to
24.82 billion pounds in 2018/19, from 17.76 billion in 2015/16.
($1 = 15.6100 Egyptian pounds)
(Reporting by Patrick Werr
Editing by Aidan Lewis and Susan Fenton)