VZCZCXYZ0009
RR RUEHWEB

DE RUEHEG #2552/01 2281216
ZNR UUUUU ZZH
R 161216Z AUG 07
FM AMEMBASSY CAIRO
TO RUEHC/SECSTATE WASHDC 6560
INFO RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC 0315

UNCLAS CAIRO 002552 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR NEA/ELA, NEA/RA 
USAID FOR ANE/MEA MCCLOUD AND DUNN 
USTR FOR SAUMS 
TREASURY FOR MATHIASON AND HIRSON 
COMMERCE FOR 4520/ITA/ANESA/OBERG 
 
E.O. 12958:  N/A 
TAGS: ECON EFIN EG
SUBJECT: WIDESPREAD OPPOSITION TO BANQUE DU CAIRE SALE 
 
Sensitive but Unclassified.  Please protect accordingly. 
 
REF:  Cairo 2307 
 
------- 
Summary 
------- 
 
¶1.  (U) Recent press reports claimed that the GOE had postponed 
indefinitely the selection of a sale advisor for Banque du Caire, 
due to public opposition to the sale.  Central Bank officials denied 
these reports, and indicated that an advisor would be selected by 
the end of the month.  Opposition parties across the spectrum have 
vocally opposed the sale, as have grassroots organizations, such at 
"The Popular Movement to Counter the Sale of Egypt."  Independent 
members of parliament tied to the Muslim Brotherhood have also 
petitioned to re-open debate in parliament on the sale. 
 
------------- 
False Reports 
------------- 
 
¶2.  (U) On August 16 Deputy CBE Governor Tarek Amer denied press 
reports that the Central Bank had postponed indefinitely selection 
of a sale advisor for privatization of the Banque du Caire.  An 
advisor was supposed to be chosen by early August, and several 
financial institutions, including Citibank, have already submitted 
bids for the job.  The committee to select the sale advisor - 
comprised of the Central Bank, and the ministries of Finance and 
Investment - has yet to meet.  Amer told econoff that the CBE was 
waiting for a Prime Ministerial decree to form the committee, which 
is slated to happen by the end of the month. 
 
----------------- 
Strong Opposition 
----------------- 
 
¶3.  (U) The press reports alleging postponement of the sale advisor 
selection cited a "source close to the operations," who said that 
the Central Bank postponed selection of the sale advisor due to 
widespread opposition to the sale.  The source indicated that the 
Central Bank will wait for opposition to die down before taking any 
further steps in the sale.  Political parties across the spectrum 
have vocally opposed the sale and criticized handling of 
parliamentary debate on the sale.  Mahmoud Abaza, Chairman of the 
Wafd party, started a petition against the sale.  He also wrote to 
several newspapers clarifying that the Wafd party is not opposed to 
the sale per se, but wants greater transparency and more shares sold 
to the public in an IPO.  Abaza also stressed that foreign entities 
should not be allowed to control the banking system.  In support of 
the Wafd petition, the Lawyers' Syndicate launched a campaign to 
raise funds to buy shares of the bank should they be offered for 
sale in an IPO.  The leftist Tagammu party held a protest August 3 
in which approximately 200 party members and supporters attempted to 
march to Talaat Harb Square in downtown Cairo.  Security services 
prevented the demonstrators from leaving the area in front of the 
party's headquarters. 
 
¶4.  (U) Independent members of parliament tied to the Muslim 
Brotherhood (MB) have also called for a new parliamentary debate on 
the sale.  The independent members asked the speaker of parliament 
to investigate irregularities during the meeting of the Economic 
Committee to discuss the sale (reftel) and demanded another meeting 
to re-open the discussion.  The memo also called for an 
investigation of Ahmed Ezz, Chairman of the Planning and Budget 
Committee, who allowed "unauthorized" individuals into the Economic 
Committee meeting. 
 
¶5.  (U) Popular opposition to the sale of Banque du Caire, and 
privatization in general, has coalesced around Yehia Abdel Hadi's 
"Populist Movement for Countering the Sale of Egypt."  Abdel Hadi 
told the press that the organization includes members from 
opposition parties, the MB, intellectuals and economists, labor 
union members, and NGOs, including the entire Kefaya organization. 
The movement tracks the outcome of privatization deals and prepares 
reports on those who benefited from the deals.  According to Abdel 
Hadi, the movement will also provide legal assistance to employees 
of public companies disadvantages by privatization. 
 
------- 
Comment 
------- 
Comment 
------- 
¶6.  (SBU) Much of the opposition appears focused on the specter of 
foreign control of the economy, which conjures very negative images 
for Egyptians.  While Egypt became nominally independent in 1922, 
Britain still controlled the economy long after that, primarily 
through the banking system.  Despite opposition to the sale, it is 
unlikely that the Central Bank will change the course it has set. 
While the sales advisor was to be selected by end-July, many viewed 
that target date as overly optimistic.  The "surprise approach" used 
in the Banque du Caire case, in contrast to the considerable public 
notice given of the Bank of Alexandria sale, is contributing to the 
public outcry.  The flip side of the surprise approach is that once 
the public outcry dies down, the overall process should ultimately 
be faster, because some of the preparation has already been done. 
For example, Banque du Caire's portfolio of non-performing loans 
(NPLs) was transferred to Banque Misr in advance of the 
announcement.  Revenue from the sale of Banque du Caire will be 
needed to pay off the NPLs.  A cancellation or significant delay in 
the sale would cause serious problems for the GOE, as Banque Misr, a 
larger and more important public bank, would be left in an extremely 
precarious position, with NPLs beyond its capacity to settle. 
RICCIARDONE