Egypt's cash-strapped rulers woo former regime tycoons

CAIRO (AFP) - Almost three years after an uprising fuelled by the old regime's venality, Egypt's cash-strapped Islamist government is making amends with businessmen who offer to pay their way back into the fold.

The presidency, strapped to a free falling economy, has said it encourages reconciliation with the businessmen.

The presidency has sent "a positive message to businessmen to encourage them to settle their situation legally, and the state strongly welcomes them to participate," said presidential spokesman Ihab Fahmy.

Mr Fahmy's statement came after the country's tax authority reconciled with the multi-billionaire Sawiris family, accused of tax evasion through a company in their Orascom conglomerate.

The dispute was settled with an agreement to pay a little over US$1 billion (S$1.26) over a five year period, with an immediate payment of US$357 million.

Authorities are now negotiating with Hussein Salem, on trial in absentia along with the toppled president Hosni Mubarak on corruption charges.

Salem, once a close associate of Mubarak, fled to Spain after the early 2011 uprising that overthrew Mubarak. He has already been sentenced to 15 years in prison in another corruption trial.

The prosecution announced that Salem has offered to forego 75 per cent of his family's wealth in Egypt, and more than half of its properties and fortune abroad.

The prosecution said it was still in talks with Salem's lawyer.

It demands Salem's former business partners abroad to drop their claims against Egypt after the cancellation of contracts with Salem's former company, East Mediterranean Gas.

Salem's lawyer, Tareq Abdel Aziz, has been quoted in Egyptian press estimating his client's worth at US$1.6 billion.

The reconciliation deals are rooted in a decision by the former military rulers, who took charge of the country after Mubarak's overthrow and before President Mohamed Morsi's election last June.

The military's decree allows for reconciliation as long as court sentences against the businessmen convicted of corruption under Mubarak can be appealed.

Economic analysts say the overtures to the businessmen aim at scraping in funds to cushion the economy, which has sharply declined since the 18-day uprising that ousted Mubarak.

The uprising ushered almost two years of political instability, punctuated with often deadly protests and a deadlock between the Islamist Morsi and his secular leaning opposition.

"The deal the government made with the Sawiris family which brings in 2.5 billion pounds (S$453 million) almost covers an important part of the budget, social security payments," said Ahmed al-Sayyed al-Naggar.

Mr Naggar, an analyst with the Al-Ahram Centre for Political and Strategic Studies, a government-funded think tank, believes there could also be a political aspect to the reconciliation deals.

Mr Morsi's movement, the Muslim Brotherhood, "believes that Mubarak's businessmen are capable of funding election campaigns against them," he said.

Egypt is expected to hold a parliamentary election later this year to replace the Islamist-dominated house annulled by a court before Morsi's election.

Mr Abdul Hafiz al-Sawi, who sits on the economic committee of the Brotherhood's Freedom and Justice Party, defends the controversial deals as long as "the state's funds are not lost and they are done legally."

"We have an unemployment rate higher than 13 per cent and a budget deficit," he told AFP.

"Is it in our interest to continue with this stagnation for years to come or to reconcile, within a legal framework, to benefit the economy?" he said.

The government wants to ensure the businessmen keep their money in Egypt, said Nassir Amin, the head of the Arab Centre for Judicial Independence.

"There is a political desire to reconcile with businessmen affiliated with the former regime, to keep them in Egypt," he said.

In a televised statement on Wednesday, Mr Morsi reached out to businessmen and investors, as part of a wider call for national unity.

"Let's look forward, not back. Let's reconcile with those who seek reconciliation, including investors and businessmen," Morsi said.