 |
Al-Ahram Weekly 24 Feb. - 1 March 2000 Issue No. 470 
|
||
Published in Cairo by AL-AHRAM established in 1875 |
| ||
|
Al-Ahram Weekly 24 Feb. - 1 March 2000 Issue No. 470
|
||
| Published in Cairo by AL-AHRAM established in 1875 |
| ||
Egypt Region International Economy Opinion Culture Features Focus Heritage Profile Travel Living Sports People Time Out Chronicles Cartoons Letters
Making sense of a mega-project mess
By Gamal Essam El-DinThe Aswan Iron and Steel Project (AISP), one of former Prime Minister Kamal El-Ganzouri's mega-projects, has almost come to a halt. This came after Prosecutor-General Maher Abdel-Wahed ordered that AISP's chairman Mohamed Bahgat and his deputy Mohamed Shimi be remanded into custody for 15 days on charges of profiteering and misappropriation of public funds. Last week, their custody was renewed for an additional 15 days in addition to a travel ban being placed on six of Bahgat's aides.
Initiated in 1998 to extract and refine iron ore from deposits located east of Aswan, the project was to draw on public and private sources of investment.
Bahgat's arrest follows a month-long press campaign and a barrage of criticism in parliament directed at both the project and its chairman. The press campaign, led by the weekly Akhbar Al-Youm, alleged that Bahgat embezzled LE41 million -- the value of the public financial contribution to the project -- and forged documents to support his claims of having obtained private funding for the project.
In their criticism, many parliamentarians questioned the viability of AISP. They asserted that the project is economically unsound in light of the fact that Egypt's two existing steel plants in Alexandria and Helwan are losing money. Besides, they added, studies have shown that iron ore deposits east of Aswan are rife with impurities, meaning that considerable costs will be incurred to refine the ore.
Intervention into the project came from the highest level as President Mubarak personally stepped in to prevent a national bank -- widely rumoured to be the National Bank of Egypt -- from loaning the project LE800 million. To determine future of the project, President Hosni Mubarak directed Industry Minister Mostafa El-Rifa'i to commission a feasibility study from a Canadian consultancy firm.
For its part, the People's Assembly Industry Committee decided to reopen its discussion of the project. Notably, the press campaign against the project charged that the committee approved it without sufficient debate when it was reviewed in May 1998.
AISP to be implemented by two companies, one of which is Aswan Development and Mining Company. This was established with a capital of LE10 million, to which Bahgat and his deputy Shimi paid LE6 million. Other contributors, including American, French and German companies, put up the remaining LE4 million.
Irregularities in the project came with the establishment of the second company, Aswan Iron and Steel Company. This was initially founded with LE10 million, an amount later raised to LE100 million. Bahgat claimed that he made up the LE90 million difference, paying this to Germany's Mannesman company for equipment and supplies. At this point, the project received public funds when, on the recommendation of the El-Ganzouri government, three public companies purchased stock in the new company. Bahgat sold part of his shares to El-Sharq Insurance Company (at a value LE5 million), Misr Bank (LE10 million), and the Bank of National Investment (LE26 million).
The press campaign, however, alleged that the documents presented by Bahgat to prove that he had paid Mannesman Company FF54 million (approximately LE90 million) are false. The prosecutor-general is currently investigating the authenticity of the documents.
In the debate on the project, members of the assembly's Industrial Committee directed a barrage of criticism against former Prime Minister Kamal El-Ganzouri. They charged that El-Ganzouri, in his feverish drive to initiate development mega-projects, facilitated AISP's access to credit. Ayman Nour, a member of the opposition Wafd Party, argued that AISP was based on swindling from its beginnings. He said that Bahgat used the project to obtain loans from banks. "AISP depended on bank loans to finance 67 per cent of their investments. This means that the project was not a goal in itself. It was just a means to get loans," said Nour. "Worse, the El-Ganzouri government introduced the project to the public as a mega-development project. It asserted that the area east of Aswan has huge deposits of iron ore. This later proved to be false."
The Ministry of Industry and the General Egyptian Authority for Geological Surveys were also blamed by Nour as negligent, having failed to conduct a thorough feasibility study on the project.
Responding to criticism of the project, AISP's legal consultant Hosni Abdel-Hamid described it as a positive endeavour to develop huge iron ores east of Aswan. He characterised attacks against it as being motivated by personal interests, and cited the favourable report on the project's prospects that was prepared by the assembly's Industrial Committee three years ago. Abdel-Hamid cautioned: "the present hostile campaign is detrimental to the state's reputation and the investment climate."
While the prosecution's investigation is in progress, parliamentarians raised three questions. Firstly, if Bahgat is found guilty, what will happen to the public and foreign contributions to the project? The second question concerns the extent to which the El-Ganzouri government is responsible for fast-tracking the project without sufficient studies. Concerning the future of iron ore deposits east of Aswan, parliamentarians question what will be the fate of the law enacted by the assembly in June 1997 to grant AISP the concession to explore iron ore deposits east of Aswan. Previously, this concession was held by the public sector's Helwan Iron and Steel Company.
