Chronicle of the Middle East and North Africa

Egypt’s President Has Promised to Tackle Corruption, but Can He?

egypt-economy- Habib al-Adly attends his trial on charges of corruption
Former interior minister Habib al-Adly attends his trial on charges of corruption, in Cairo, Egypt, 19 April 2016. Photo Shutterstock

Corruption in Egypt is rife, despite President Abdel Fatah al-Sisi’s 2014 election promise to root out graft. Transparency International, a non-profit organization that monitors corruption worldwide, ranked Egypt 108th out of 176 countries in its 2016 Corruption Perceptions Index, two places lower than the year before.

The ranking followed claims made earlier that year by Hisham Geneina, the former head of the Central Auditing Organization (CAO), Egypt’s anti-corruption agency. Geneina alleged that more than 600 billion Egyptian pounds (EGP) ($76 billion) was squandered by government officials between 2012 and 2015. At least that is what he told reporters, in the hopes of pressuring the government to take action.

His plan backfired. Parliament responded by granting al-Sisi the power to fire heads of watchdog agencies. Geneina was removed from his post in March 2016 and his claim was investigated by a government committee. A gag order followed, barring any investigation into corrupt practices. On 28 July 2016, he was sentenced to one year in prison for ‘disseminating false news’ although he was later released on bail. Human Rights Watch criticized the government’s response, warning that the absence of free speech runs counter to combatting corruption.

The Crackdown

Al-Sisi overlooked the correlation, although he appears convinced about how to fight corruption. In 2015, he asked Petroleum Minister Sherif Ismail to form a new government and purge the parliament of corrupt officials. At around the same time, Salah Halal, then agricultural minister, resigned after being accused of receiving bribes.

The government was finally taking measures to hold some ministers accountable. The United Nations Office of Drugs and Crime (UNODC) even assisted the government in detecting corruption and recovering assets.

The state then launched a series of television ads, warning against the perils of corruption in the public and private sector. Wasta, an Arabic term that roughly translates as nepotism, was a recurring theme. But anti-corruption advocates such as the World Bank and Human Rights Watch were wary of the government’s motives, especially since none of its measures addressed the root of the problem. Major institutions still need to be reformed and laws against corruption remain arbitrarily applied.

Ahmad Saqr Ashur, an UN expert in combatting corruption, told al-Monitor that all organs of the state should be required to disclose their budgets. The government, he added, ought to establish an independent body to identify and investigate suspects. However, no such measures have been introduced, leaving corruption firmly entrenched in Egypt’s economy.

Furthermore, whistleblowers are not protected by the law, which has deterred many people from speaking out. The ones who do are often subjected to harassment, reprisal and arrest, as was the case with Geneina.

Egypt’s Kafka-like bureaucracy is another impediment to transparency. Overcrowded and overstaffed, government departments routinely extract bribes to facilitate basic requests. The size of the public service – consisting of nearly 7.2 million employees – poses a major challenge to authorities attempting to conduct proper investigations, which they rarely do.

Municipalities are also corrupt. The Forum for Development and Human Rights estimated that 494 million EGP ($55.7 million) was unaccounted for by local officials. The government responded by passing a new law that enables municipal representatives to request an investigation if they suspect corruption. But the lack of political will to apply the law remains an issue.

In December 2016, al-Sisi reiterated his ‘‘seriousness’’ about eradicating the problem, urging citizens not to smear entire institutions for the wrongdoings of a few people.

Who Loses Out?

Yet recent studies indicate that corruption is endemic in nearly all of Egypt’s state institutions. The World Justice Project, an independent organization committed to promoting the rule of law, found that half of Egyptians surveyed admitted to paying a bribe to access a service.

Scholars say that corruption disproportionately affects the poorest strata of society. Last year, Egypt’s Central Agency for Public Mobilization recorded that almost 28 per cent of the population lived below the poverty line.

Reem Abdel Halim, a professor of Economics at Cairo University, told Daily News Egypt that Upper Egypt remains one of the poorest regions in the country due to a lack of sustainable development and corruption. In Cairo and Alexandria, Egypt’s largest cities, many people cannot afford to bribe authorities to obtain basic services or legal protection.

Egyptians are particularly distrustful of law enforcement, and for good reason. Police brutality has continued unabated under al-Sisi, bribes are requested to investigate an incident and money is often extorted from offenders.

Prison guards are no better. According to the UK-based Arab Organization for Human Rights, 337 prisoners were denied access to medication in June 2013. Many others were deprived of food until they paid a small bribe. Some analysts have said that corruption, more than any other factor, is responsible for the stark inequality in Egypt.

The Natural Resource Governance Institute revealed that there is little transparency in Egypt’s natural resources sector. They suspect that there is staggering corruption in fuel subsidies due to a lack of oversight and the amount of money invested in the sector – the government pays nearly 95 billion EGP ($5.2 billion) to subsidize fuel each year.

Food subsidies have certainly been squandered. Last year 2016, a Reuters investigation exposed how fraudulent wheat purchases had cost Egypt hundreds of millions of dollars. The shortage of basic staples has exasperated Egyptian youth, some of whom have staged demonstrations despite the risk of being jailed.

In 2015, Egypt sought help from Saudi Arabia to stabilize the economy. It received billions of dollars from the oil-rich kingdom, yet more than 40 per cent of Egyptian youth remained unemployed, according to the International Labor Organization. Much of the money borrowed from the Saudis disappeared, including $20.5 billion that was held in the Central Bank’s reserves.

The situation has worsened since the government floated the Egyptian pound on 3 November 2016 – one of the main requirements to secure a hefty loan from the International Monetary Fund (IMF) – causing it to lose more than half its value. Yet the political risks are high, as al-Sisi is now obligated to take harsh austerity measures despite promising immediate stability.

Cleansing the Private Sector

The private sector is little better. The World Bank released a report in 2014 stating that Egypt needed to produce more secure jobs if the country was ever going to recover from years of economic turmoil. Stable growth in the private sector is the only way to do that, alongside encouraging competition and empowering entrepreneurs. In the case of Egypt, a thriving private sector would offer a viable alternative to the civil service.

The IMF loan is supposed to help Egypt by facilitating an economic climate that is appealing for investors and big businesses. But that alone will not solve the problem unless the private sector becomes more transparent. Companies have said that ineffective bureaucracy is a major impediment to operating in Egypt, requiring them to give gifts to officials in order to get anything done. In fact, nearly one third of firms admitted to paying a bribe in exchange for acquiring and registering property. That is one reason Egypt’s private sector was ranked the most corrupt in the world by the international ‘big four’ audit firm Ernst & Young.

To his credit, al-Sisi has kept tycoons who were embedded in Mubarak’s regime out of the political sphere. That being said, he has arguably replaced an old crony elite with a new one. The military, for instance, has become a more aggressive player in the market. The country’s National Service Project Organization, which the military controls, has entered new financial sectors including housing, vaccine manufacturing and education. Al-Sisi, as expected, will shield the country’s strongest and most oppressive institution from criticism and investigation.

Amr Adly, a non-resident scholar at the Lebanon-based Carnegie Middle East Center, suspects that not everyone who profited under Mubarak will be swept aside. Instead, the size and strength of some of his cronies, such as cable manufacturer Elsewedy and food producer Juhayna, make them indispensable to Egypt’s economy. And they could still prosper, albeit not as much as they did before the 2011 revolution. It may even be in their interests to lobby for a less regulated and more transparent private sector in order to prevent a new corrupt elite from monopolizing the market. With that in mind, they must be pleased with Egypt’s adoption of IMF regulations.

However, most Egyptians are preparing for the worst. They fear that ongoing corruption, coupled with aggressive neo-liberal policies, will exacerbate their struggle to make ends meet. They have every reason to be worried. The price of imports has skyrocketed, making many of the most basic staples unaffordable. The tourism industry, which accounted for 20 per cent of foreign currency before 2011, shows no signs of recovering. Labour protests, which are often directed at the same businesses that exploit a deregulated market, have also gripped the country since Mubarak was removed.

Al-Sisi is facing a ticking time bomb. The pressure to improve the lives of millions of unemployed youth, many of whom took part in the 2011 revolution, is his biggest incentive to limit corruption. Doing so must translate into more prosperity for working-class Egyptians, and soon. But it may already be too late. Adel Abdel Ghafar, a visiting fellow at the Brookings Doha Center, warns that if al-Sisi does not deliver on his promises, Egypt may once again be thrown into turmoil.

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