CORRECTED: Egypt expands officials' authority in bypassing public tender process

Ahmed Feteha, Friday 13 Sep 2013

Presidential decree amends tenders and auctions law to raise ceilings for values of property and services government officials can buy and sell by direct order

Egypt's interim President Adly Mansour (Photo: AP)

Egypt's interim President Adly Mansour on Thursday issued a decree amending the country's tenders and auctions law, raising the ceilings for the values of property and services government officials can buy and sell by direct order.

The 1998 law stipulates that in certain "urgent" cases, ministers and heads of government bodies have the authority to bypass the requirement to hold public auctions or tenders when buying services or products, or assigning contracts.

The amendment raised the value of movables and services that could be purchased without tenders from LE100,000 to LE5 million for ministers and from LE50,000 to LE500,000 for heads of government authorities and institutions. The value for jobs contracted out was raised from LE300,000 to LE10 million for ministers and from LE100,000 to LE5 million for heads of government bodies.

Egypt's annual inflation rate has averaged 7.4 percent from 1998 to 2012, according to World Bank data. The exchange rate of the Egyptian pound against the US dollar dropped from LE3.38 to the dollar in 1998 to more than LE7 to the dollar in 2013.

The amendment also added a clause stipulating that the law only applies to government bodies that are not subject to special laws or regulations. This explicitly exempts many government bodies from the necessity of holding public auctions in certain cases, including selling publicly-owned land.

Egyptian courts have annulled many government contracts for not complying with the 1998 law. An early high-profile case was the government's sale of some 8,000 acres of land east of Cairo to property developers the Talaat Moustafa Group (TMG) for its flagship real estate project "Madinaty" in 2005 for $3 billion, which was annulled in 2010. This has prompted many to call for a more restrictive tenders and auctions law, dubbing the existing regulations “a gateway to corruption.”

Others, however, believe that it is essential for officials to have the authority to avoid public tender where necessary.

"In many cases, it is more efficient to spend money by direct order rather than through tenders," former minister of communications and information technology Maged Osman told Ahram Online. He cited the example of Microsoft products, which are cheaper when bought directly from Microsoft than through tenders from other distributors.

Osman explained that proper transparency regulations need to be put in place to prevent the law from being misused.

Many Egyptian officials, including former ministers, have been put on trial over the past few years for allegedly squandering public money by directly allocating deals.

Mubarak-era prime minister Ahmed Nazif and former interior minister Habib El-Adly are currently being tried for ordering the purchase of number plates for cars from a German company rather than allowing a competitive bid to be tended.

Osman warned that, despite the legal allowance, officials might still be wary of taking decisions that might incriminate them later.

"There have been cases where officials have asked for unrealistically low prices from contractors and as a result projects have stalled for years," Osman said, citing the LE5 billion fund allocated for railway improvement in recent years that was not spent because officials "did not want to bear the responsibility."

Egypt fell six spots in Transparency International's annual Corruption Perceptions Index in 2012, to 118th place out of 176 countries.

The perceived corruption of the Hosni Mubarak regime fuelled public anger against his rule, leading to his eventual ouster in February 2011.

He is facing retrials on several corruption charges.

This title of this article was corrected on 14 September to reflect that the amendment raised ceilings for values of property and services government officials can buy and sell by direct order

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