It takes more than a settlement…

01-03-2013 03:00 PM

Fady Labib -Katrine Faragallah

Will the State work out settlements with former officials or businessmen accused of violating Egypt’s public funds during the Mubarak regime? A few weeks ago, the Prosecution for Public Funds (PPF) issued a list of names of 20 businessmen who had filed requests for reconciliation with the State and reimbursement of funds they are accused of obtaining illegally during the Mubarak time. The list included State officials and prominent businessmen who had been closely linked to the old regime and who are today either in prison in Egypt or have escaped Egypt altogether. Among the names on the list were former Prime Minister Ahmed Nazif, former Minister of Industry and Foreign Trade Rasheed Ahmed Rasheed, former Minister of Tourism Zuhair Garana, and former MP and business tycoon Ahmed Ezz.
The settlement initiative, the PPF statement confirmed, was conceived within the legal framework and provided a faster alternative to settle financial disputes away from the slow procedure of the courts of law. It ensured the reimbursement of considerable amounts of public funds which, according to the statement, were the outcome of violations of public asset management by officials in the Mubarak regime. Today, the Egyptian State is in dire need of this money.

Not just yet
A few days later, however, many of the former officials and businessmen who had originally accepted reconciliation with the State decided to freeze the settlement negotiations after the court of cassation recently ordered their retrial. The court ruling sent a clear message that there was no conclusive evidence to incriminate these officials, and that the prison sentences they were handed and hefty fines they were ordered to pay may have been politically motivated or under pressure of public hostility. It must be remembered that these figures have been subjected to intensive smear campaigns by the media ever since they have been out of office.
Rumour has it that some businessmen belonging to the MB have repeatedly visited the convicted businessmen to persuade them to proceed with the reconciliation, but their attempts were rejected. According to legal sources, fugitive businessman Hussein Salem is the only one who is still proceeding with his settlement agreement, offering to pay 50 per cent of his fortune in return for his acquittal.
The PPF has pointed out that reclaiming embezzled funds through courts of law is a complicated process involving tedious scrutiny in the rules of refunds of international laws and conventions. On the other hand, resorting to out-of-court settlements in cases related to illegal acquisition of public funds can lead to a legal and financial compromise guaranteeing the rights of all the parties involved.
As the reconciliation with businessmen and investors receive massive media coverage, Watani has attempted to survey the opinion of economists and former State officials to fathom the dimensions of the case.

In a wider context
Some Egyptians strongly criticise the reconciliation with the businessmen who had close ties with the former regime, on grounds that they committed crimes they should be made to pay for, no matter what. Yet former PM and economist Abdel-Aziz Higazy describes the State’s decision to resort to reconciliation as a definite positive step forward; a message of reassurance not only to the business community but also to society as a whole. He sees the process in a wider context, as one that would have impact on the entire political and economic climate in Egypt.
“Nothing is more harmful to the current business environment, Dr Higazy insists, “than the constant amendment of investment laws. This creates a state of uncertainty and confusion for investors. The State must work on defining a final form of the business laws in Egypt, which should then reflect positively on the business and investment climate now and in the future.”
The settlement agreements between the State and the businessmen convicted of graft or corruption, according to Dr Higazy, have to be based on honourable and balanced terms. Reconciliation must offer objective and open-minded solutions, and must also include conditions to regulate the resumption of the businessmen’s operation.

State in dire need of funding
Dr Samir Kurayim, former undersecretary at the Ministry of Economics and former Manager of the African Bank, strongly approves of the reconciliation initiative. Similar settlements were conducted by South Africa’s Nelson Mandela after he took office, Dr Kurayim reminds; the most important question is to whether the reconciliation process will be conducted by a specially appointed committee conducting objective estimation.
Considering the huge current budget deficit, the settlement is considered the only guaranteed source of revenue for the State treasury which is in dire need for funding. The recovery of the funds that were allegedly smuggled to England and Switzerland is not guaranteed because the terms of such agreements are still unclear; moreover, the tax yield which is also expected to ease a portion of the current and future budget deficit is also not yet known.
“We should never forget that investors are the ones capable of creating employment opportunities, especially under the current harsh economic conditions,” Saad Abdel-Khaleq, professor of economics and former under-secretary at the Ministry of Industry and Foreign Trade, stresses. Dr Abdel-Khaleq sees no objection to the settlements between the State and businessmen and investors as long as it is in the country’s best interest.
Appeasing conflicts and walking the path of reconciliation and trust is in the best interest of the country in general, he says. Regardless of collecting money from businessmen and investors, providing a general state of stability will have positive impact on the business environment.

Directing the yield to the poor
For her part, Assistant Professor of Economics at Cairo University, Amira al-Haddad, sees the reconciliation with businessmen and investors as a very controversial issue. For settlements to succeed, she says, they must be subject to rigid State regulations involving a ban from participation in political life for a minimum of 10 years. An economic reconciliation will definitely have a positive impact on the economic climate provided it follows the rules of transparency. The State must publish the amount of confiscated funds and the treasury must ensure their collection under the supervision of civil society organisations.
The reconciliation funds, Dr Haddad says, must be directed to noble causes that serve the social groups that are in need rather than directing them to the upper classes. They can be used for building housing projects or providing basic services and utilities to slums and remote areas where 30 per cent of the population resides. As she praises the experience of South Africa in conducting successful settlements with the businessmen, Dr Haddad hopes the Egyptian initiative will follow in its footsteps.

Regaining investors’ confidence
According to Dr Fouad Shaker Amin, former Secretary General of the Union of Arab Banks, it takes more than reconciliation with the cronies of the former regime to improve the Egyptian investment climate. During the Mubarak era, economic reform measures were taken by privatising many public sector companies that suffered huge losses, and selling them to local and foreign investors. After the 2011 Revolution, court rulings were issued to return many of these privatised companies to the public sector. These rulings violated all international laws and cast local and foreign investors in a bad light. This resulted in a state of doubt and confusion to many investors, dissuading them from investing in Egypt; consequently, investment rates dropped significantly. A presidential decree must therefore be issued followed by the drafting of a new law to protect investments in Egypt and regain investors’ confidence.
Economic expert Hamdy Abdel-Azeem, agrees that turning over a new leaf with businessmen can have positive effects on investment. Nevertheless, the real problem lies in the constant contradiction of government policies and amendment of investment laws, especially with the frequent cabinet reshuffles. This creates a shaky investment climate. Any initiative to persuade investors to resume their activity in Egypt must therefore be accompanied by guarantees to investors against pursuit and exclusion. Foreign investors must have the right to resort to international arbitration and to be protected against claims of corruption as long as no evidence is provided against them.
All this says that reconciliation is needed more than ever to convey a message of reassurance to both local and foreign investors, especially that Egypt is in dire need for their contribution to the economy.

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