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DE RUEHEG #1988/01 1821136
ZNY CCCCC ZZH
P 011136Z JUL 07
FM AMEMBASSY CAIRO
TO RUEHC/SECSTATE WASHDC PRIORITY 5875
INFO RUEHUNV/USMISSION UNVIE VIENNA PRIORITY 0098
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY

C O N F I D E N T I A L CAIRO 001988 
 
SIPDIS 
 
SIPDIS 
 
NEA FOR ELA 
INL FOR CLINE/VERVILLE 
UNVIE FOR SOLOMON 
 
E.O. 12958: DECL: 06/26/2017 
TAGS: ECON KCOR PINR EG
SUBJECT: EGYPT: MORE CORRUPTION CHARGES, AD HOC RESPONSE 
 
REF: 2006 CAIRO 7190 
 
Classified by Counselor for Economic Affairs Catherine 
Hill-Herndon for reasons 1.5 b and d. 
 
¶1.  (C) Summary: A recent report of a Shura Council member 
arrested for smuggling, corruption accusations in the 
People's Assembly by a Muslim Brotherhood (MB) legislator 
against businessmen affiliated with the National Democratic 
Party (NDP), and suspicions about the bidding process for a 
government satellite tender reflect the continuing prevalence 
of concerns about corruption in Egypt.  Whether these 
concerns arise from actual graft or opaque, inefficient 
transactions that create the appearance of corruption, they 
reinforce the perception among Egyptians that they can't 
trust their government and fuel a potent political issue for 
the opposition. END SUMMARY. 
 
-------------------------------------- 
Smuggled Cell Phones, Shady Land Deals 
-------------------------------------- 
 
¶2.  (U) On June 4, airport customs officials stopped Shura 
Council member Hosam Abdul-Mohsen Mekawy, a farmer from 
Gharbia province in the Delta, on arrival from Dubai carrying 
1,000 cell phones and 8,000 memory cards worth LE 3 million 
(USD $525,000).  Mekawy's parliamentary immunity was due to 
expire at the end of June, according to press accounts, 
although immunity has been withdrawn in similar cases 
(reftel).  Mekawy agreed to pay all taxes and fines in return 
for waiving prosecution. 
 
¶3.  (SBU) The take from Mekawy's efforts would have been 
modest compared to the cost to the Egyptian treasury of 
sweetheart deals for government land. On June 9, Saad 
al-Husseini, a leader in the MB bloc of Parliament, charged 
that Ministry of Housing land sales to NDP-affiliated 
magnates including Ahmed Ezz and Mohamed Farid Khamis at 
below-market prices cost the Egyptian treasury LE 59 billion 
(USD $10.4 billion), compared to the value of the land if it 
had been auctioned per standard practice. 
 
¶4.  (SBU) While that figure seems inflated -- it would equal 
36 percent of all government revenues in the most recent 
budget -- few Egyptians question that prominent businessmen 
profit from their connections to the NDP.  In fact, a recent 
Zogby poll commissioned by US CENTCOM found that corruption 
was second only to unemployment among Egyptians' top domestic 
concerns. 
 
----------------------------------- 
NileSat Deal Rigged For The French? 
----------------------------------- 
 
¶5.  (SBU) American business contacts also suspect corruption 
behind some GOE practices, such as a recent convoluted tender 
for satellite services.  In April 2007, NileSat, an Egyptian 
majority government-owned company that operates satellites 
providing television, radio, and data services, unexpectedly 
canceled an August 2006 request for proposal (RFP) for a 
contract for a new communications satellite, despite 
NileSat's assurances to the Commercial Counselor that this 
would not happen.  U.S. company Orbital, one of the bidders 
for the RFP, requested USG advocacy support, expressing 
concern that the RFP would be reissued in a manner favoring 
the French company Alcatel, the main competing bidder. 
Orbital's total bid was tens of millions of dollars less than 
Alcatel's when the bids were publicly disclosed on November 
5, 2006, in a tender that would eventually have been worth 
approximately $400 million in U.S. exports to Egypt. 
 
¶6.  (SBU) Information Minister Annas Al Fiqqi told the 
Ambassador April 23 that reissuing the RFP would ensure a 
"completely transparent process" and generate lower-priced 
bids, and that the new RFP would mirror the original. 
However, NileSat issued a new RFP on May 20, 2007 that 
significantly differed from the original and essentially 
restricted the bidding field to one viable bidder - Alcatel. 
For instance, certain "optional" specifications in the first 
tender became "required," leading to a higher-priced solution 
that favored Alcatel.  Prior to the second tender, Orbital 
had reportedly been advised that its solution was sufficient. 
 Additionally, the local Orbital representative said that 
whereas the original RFP called for a turnkey proposal to 
include satellite, ground, launch vehicle, and insurance, 
under the new RFP NileSat will procure the launch vehicle and 
insurance itself.  This change, he said, removes the cost 
savings that Orbital could bring under its turnkey solution. 
The Ambassador raised these concerns with Al Fiqqi again on 
May 28 but with no substantive response. 
 
------------------------------ 
"Mr. President, Did You Know?" 
------------------------------ 
 
¶7.  (SBU) USAID is supporting several efforts to promote 
transparency in GOE operations and increase the capacity of 
NGOs to monitor corruption.  USAID Egypt's offices of 
democracy and economic growth are working with the Ministry 
of Finance on a new budget law designed to improve the 
transparency of the national budget, while Transparency 
International is currently in negotiations with USAID to 
establish a program in Egypt that would, in part, increase 
the capacity of NGOs to analyze the new budget.  USAID is 
also in discussions with the Center for International Private 
Enterprise on a program to increase the capacity of the 
business community to monitor and lobby against corruption. 
 
¶8.  (U)  The most active anti-corruption NGO is AHERO, also 
operating as Shayfeencom (We are Watching You), which 
received USG democracy funds to publicize its campaign to 
encourage the GOE to implement the UN Convention Against 
Corruption (UNCAC, reftel).  AHERO has since received a small 
grant from the Middle East Partnership Initiative (MEPI) to 
advocate for the passage of a Freedom of Information Act and 
prod the Capital Markets Authority to impose corporate 
governance regulations and international accounting standards 
for companies traded on the Egyptian stock exchange. 
 
¶9.  (SBU) By promoting transparency and accountability, the 
organization is targeting practices that may have more to do 
with poor governance than graft and bribery. For example, the 
organization purchased a small number of shares in 
corporations traded on the exchange and used its shareholder 
rights to urge improved corporate governance.  As a result, 
she said, the Suez Canal Bank was compelled to acknowledge 
its holdings of bad debt, resulting in a steep drop in its 
share price, while the National Cement Company was compelled 
to make use of funds it had reserved, but not spent, to 
provide for worker housing. 
 
¶10.  (SBU) The organization now plans to launch a viral 
marketing campaign via cell phones and other media on the 
theme "Mr. President, Did You Know..." The campaign will 
compare public promises made by President Mubarak to 
expenditures in the national budget, noting for instance that 
the GOE has made no provision to finance the president's 
promise to create a place in daycare for every Egyptian child 
who needs one. 
 
------------------- 
Ad Hoc GOE Response 
------------------- 
 
¶11.  (C) AHERO has succeeded in attracting more media 
attention to the problem, and the GOE did publish the UNCAC 
in the official gazette in early 2007, giving the treaty the 
force of law in Egypt.  But the GOE response has remained ad 
hoc.  For example, Egypt is obligated under the UNCAC to 
establish an independent anti-corruption body, but the most 
recent such effort faltered in January when the cabinet opted 
against creation of a new anti-corruption "observatory." 
Instead the Prime Minister's office created a new 
anti-corruption coordination committee under the Ministry of 
State for Administrative Development, which Hadid said will 
lack the bureaucratic clout necessary to operate effectively. 
 
 
¶12.  (C) COMMENT: The new committee may satisfy one of 
Egypt's obligations under the UNCAC, but it will likely do 
little to ease public concerns about corruption or quiet 
opposition politicians eager to capitalize on those concerns. 
RICCIARDONE