Corruption in Egypt: Living in the Times of Oedipus

Corruption in Egypt: Living in the Times of Oedipus

November 29, 2016

By Jeffrey Dexter and Yehia Mokhtar​​

In 2016, Kroll surveyed global compliance executives and found that 40% believe their organization’s anti-bribery and corruption risks will increase this year. 80% expressed little to no confidence in their organization’s ability to detect third party violations of anti-corruption laws. These are staggering findings that can be exacerbated by jurisdictional-specific risks, such as those found in Egypt.

Head of the Central Auditing Authority, Hisham Geneina, the last Egyptian official appointed under the brief presidency of Mohamed Morsi, was dismissed by President Abdel Fattah Al-Sisi on March 28, 2016 and later placed under house arrest. Since June 2016 he has been facing criminal charges of “spreading false news and disturbing the peace,” potentially carrying a one-year jail sentence; Geneina is currently appealing these charges. Geneina’s transgression was his controversial estimation that Egypt lost at least EGP 600 billion (then approx. USD 76.6 billion) to corruption in 2015 alone. Al-Sisi’s fact-finding commission claimed that the amount spanned across a four year period since 2012 and determined that Geneina misled the public, made exaggerated statements, and misused the term corruption.  Some Egyptian media articles argued that Geneina’s estimate was rather conservative. It is hard to disagree when much of the rampant petty corruption in Egypt has gone under the radar from local authorities and state-run press during Hosni Mubarak’s 30-year rule, if not earlier. Mubarak and his son Gamal’s inner circle, structured around the National Democratic Party (NDP), controlled the major industries of Egypt for decades.  If you were loyal to the NDP and had the right connections, corruption was widely condoned. While the NDP was officially dissolved in April 2011 and the regime recently snapped back from democratically-elected Morsi to military rule in 2013, remains of the NDP’s influence persist in Egyptian politics and business.

Located next to the Great Pyramid at Giza is the iconic statue of The Sphinx (Arabic: Abu al hol, tr. “the father of terror”), which represents a great mythical creature. In Greek tragedy, the character Oedipus defeated the Sphinx by correctly answering its riddle, and thereby protected humanity from its tyranny. However, the initial euphoria that Oedipus enjoyed for saving humanity from tyranny did not last forever.  Today, following a number of expressions of initial euphoria and optimism in recent years, signs may be interpreted as indicating that Egypt is living through its own times of Oedipus. A 2015-2016 Transparency International poll found that 50% of Egyptians paid a bribe within the previous 12 months. The percentage is likely higher, as Egyptians have cause not to answer truthfully. Citizens have been attacked for attempting to expose corruption. Egyptian lawyer Ahmed Gad was shot three times to prevent him from attempting to blow the whistle on corruption in the wheat industry. In November 2015 investigative journalist Hossam Bahgat was detained by the military intelligence for three days; he was released after pledging to “abide by legal and security procedures when publishing material pertaining to the Armed Forces.”

Egypt does have laws designed to limit and prevent corruption. The 2014 Constitution establishes the state’s responsibility to prevent corruption in its Preamble and in Article 218. Articles 103 – 111 of Part 3 of the Egyptian Criminal Code cover bribery, with a maximum penalty of two years in prison for private citizens and longer sentences for public officials and civil servants. In 2015, Al Sisi’s legislative reform committee proposed an updated anti-corruption law, which was approved by the Egyptian State Council later that year. Furthermore, Egypt is party to the United Nations Convention Against Transnational Organized Crime, and the Arab Anti-Corruption Convention. In 2005, Egypt also ratified the United Nations Convention Against Corruption. However, as is frequently the case elsewhere, the difficulty lies in implementation, often at the will of those in power. While Egyptian Steel tycoon and former NDP official Ahmed Ezz remains in exile under pending corruption charges, billionaire Hussein Salem reached a reconciliation settlement with Egyptian authorities in August 2016.

Businesses, foreign and domestic, cannot escape the long tentacles of corruption. Bribery is not only used to expedite business, but to ensure basic rights and services are provided. The World Bank’s enterprise survey in 2013 found that 71.9% of firms “expected to give gifts” to obtain an operating license in Egypt.  All sectors of the economy are impacted by cronyism. The judiciary is largely seen as politicized, particularly since the coup that swept Morsi out of power. Those who are investigated and charged with corruption are typically not allies of Al-Sisi.

The current president has publicly claimed his desire to battle corruption, answering the calls of the Egyptian people in the early protests that forced Mubarak to resign. As evidenced above, there is a legal framework to aid that effort. However, the task is mighty. Corruption impacts nearly all aspects of life and business. To date, Al-Sisi has shielded his eyes from corruption much as Oedipus blinded himself from the further atrocities his acts set in motion.

Conducting business in Egypt remains a risky proposition. Engaging vendors in the region requires subject matter and jurisdictional expertise, the ability to conduct research in the local language, and a reputable, independent due diligence provider. Kroll Compliance has in-house multi-language fluency speakers conducting research across the Middle East.  Understand the risks involved before your business is potentially embroiled in a third-party related bribery investigation.