Sunday, December 13, 2009

How Pepsi-Cola conquered Egypt

 A building in Sallum, a remote town on the Egypt-Libya border.  Photo by Jotman.

On my first visit to Egypt, in 2002 it was hard to find Pepsi.  Eight years later, you ask for a Coke and the waiter brings you a Pepsi.  Pepsi is everywhere

How did Pepsi come to Egypt?   One answer is quite disturbing.   I've presented it in the form of a timeline derived from an article by Egyptian scholar Ahmad El-Sayad El-Naggar ("Economic Policy: from state control to decay and corruption" in Egypt: Moment of Change,  El-Mahdi and Marfleet, eds., American Univ. in Cairo Press, 2009.)  The timeline  illustrates how privatization would appear to have served to create new opportunities for state corruption.

Egypt Pepsi-Cola Timeline

1993 - "The American accountancy giant Cooper & Lybrand had evaluated its assets in 1993, calculating them at E£76 million.  The advisory office of the Holding Company for Food Industries re-evaluated them, estimating the highest market value as E£140 million." 

1994 - "Egyptian Bottling was sold to a consortium of investors for E£158, the contract stipulating that buyers would invest E£180 million during the following five years." (According to the NY Times, this consortium was led by Pepsi-Cola).

1999 - "Pepsi-Cola International bought 77% of the company from the new owners for E£1,340 million (Al-Abram, 5 Feb. 1999).  Hence, the total value of the company at this time was some E£1740 million == more than eleven times the price of its sale in 1994, which indicates that the assets had been grossly miscalculated, so that the new owners had been able to make massive profits from their sale to Pepsi."

Another perspective 

In 2005, Taher Samir Helmy,  president of the American Chamber of Commerce in Egypt offered a different  perspective on the arrival of Pepsi-Cola in Egypt.   Helmy explains:
... in the mid 70s the government basically controlled, close to 70% of the economy. Today, the private sector has over 70% of the economy. So, the transformation has been successful. It’s a goal that took perhaps longer than someone like me would have liked but certainly that was the transition. Clear difference. So encouraging the private sector which you see in all of these industrial cities was created as a result of that move in the 70s by president Sadat. And then, of course, came president Mubarak and his regime to continue the market economy direction, to continue to strengthen the private sector and moved in the same direction.

In the late 80s, when we were already present in Egypt, we participated in the process of reform. For example, we were a member of the team that drafted the Public Enterprise Law which is the Privatization Law. We participated on pro bono basis in drafting that law and to help others transform the economy.

Then we actually did the first privatization transaction in this country and that was the privatization of the Pepsi Cola companies. That was the sale of a 100 % of the shares of the Pepsi Cola beverage Co., you know, companies were actually owned by the government. They were nationalized during the Nasser era. So we helped, we did the privatization for Pepsi. And then, the second privatization which was the first asset deal, was Babckok and Wilcox, a transaction where they bought the assets of the public sector company.

So that was the beginning of the privatization of the public sector. That period is very important, and the privatization law was the cornerstone in our reform legislation because that is the law that helped transforming a central planned to a market economy. You basically take industrial enterprises and you turn it back to the private sector. That’s the privatization of the industry in Egypt.
Did the American Chamber of Commerce help to liberate the Egyptians, or merely pave the way for the enrichment of Egypt's elite?  

2 comments:

  1. Vote for Cola at http://coolometer.org ! It has a much better flavor, where as Pepsi is an artificial copy of Coke.

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  2. Even with the advantage of hindsight, my position on the importance of privatisation and the creation of a liberal economy in Egypt has not changed. I stand behind what I told the Daily News Egypt in 2008 on the importance of capitalism (http://www.taherhelmy.com/saving-capitalism-from-the-capitalists/). I believed in the empowering effect of liberal reforms back in the 1990s and I still do today.

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