to the firm (CEO or direct owner). In contrast, politically-connected firms are no more likely, or less likely, to be in less energy-intensive sectors.

**Table 5: Percent of firms and industries benefitting from energy subsidies**

||**Share of P**<br>**CEO**|**olitically Con**<br>**FIRMS**<br>**Owner**|**nected**<br>**Broad**|**Share**<br>**NON-**<br>**PC**<br>**firms**|**Share of P**<br>**IN**<br>**CEO**|**olitically Co**<br>**DUSTRIE**<br>**Owner**|**nnected**<br>**S**<br>**Broad**|**Share of**<br>**NON-PC**<br>**Industries**|
|---|---|---|---|---|---|---|---|---|
|High Energy-Intensive|55%**|49%**|45%**||22%**|66%**|81%**||
|Industry|(0.000)|(0.000)|(0.000)|8%|(0.024)|(0.000)|(0.000)|19%|
|Moderate Energy-|36%|28%**|30%**||8%|33%|48%||
|Intensive|(0.115)|(0.000)|(0.000)|63%|(0.421)|(0.340)|(0.674)|53%|
|Low Energy-Intensive|9%|23%|26%||10%|34%|43%||
||(0.196)|(0.214)|(0.173)|29%|(0.731)|(0.362)|(0.115)|57%|

Source: WITS; establishment census data; sample of politically connected firms. Note: The significance level (p-values) for the statistical difference between politically connected firms or industries (columns 1-3 and 5-7) relative to all firms or industries (columns 4 and 8) is reported in parentheses; it is based on a Pearson Chi2-test. We use the Fisher-test (instead of the Chi2-test) to test for the significance in differences between PC and NOT-PC industries with less than five connected firms of a specific type.

# **Do connected firms have better access to land, industrial zones and credit?**

Similarly, the last four columns of Table 5 demonstrate that 81 percent of industries with at least one (broadly defined) politically connected firm, compared to only 19 percent of industries without a politically connected firm, are highly energy-intensive. The difference is significant at the one percent level.<sup>24</sup> The difference is significant, as well, comparing industries with at least one firm with a politically connected owner or with at least one politically connected CEO. In contrast, once again, the share of less energy-intensive sectors with a politically connected firm, of any kind, is not different (statistically) from the share of these sectors that lack political connections.

Abundant anecdotal evidence indicates that politically connected firms in Egypt have superior access to land or credit.<sup>25</sup> In the manufacturing sector, access to land includes access to industrial zones that offer benefits to occupants that competitors outside of these zones do not enjoy, including tax exemptions from corporate taxes and customs duties, better infrastructure, and more streamlined 24 We also used a probit regression to test the probability that a sector is high energy intensive given connected firms are present controlling for the average firm size and age in the industry. We find that the probability for a 4-digit industry to be high energy intensive increases by 100 percent when a politically connected firm (broadest definition) is operating in that industry (the difference is statistically significant at the 1 percent level). The results are available from the authors upon request. Note that we can only run the probit regression at the industry but not the firm level since we cannot identify the individual politically connected firms in the establishment census data.

25 Reportedly, based on court disputes initiated after the fall of the Mubarak regime, the government not only sold the land to the politically connected, but also provided guarantees that it would connect the land with the necessary electricity, telecommunication, and transport infrastructure. This practice immediately increased the value of land, which the businessmen used as collateral to get bank loans that far exceeded the initial purchase value of the land (Ahram Online, various issues).

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