Advertising companies have brought a case against the minister of defense in what appears to be the first clear confrontation between Egypt’s business sector and the military’s economic projects.
Brewing for several weeks, the crisis centers on advertising contracts on Cairo’s ring road, namely a section where advertising investments are estimated to be worth around LE25 million.
The trouble began when the General Authority for Roads and Bridges annulled the permits of ad companies renting advertising space on the ring road. They were verbally informed that the authority was no longer responsible for advertising works on that part of the road, and companies wishing to continue advertising there should apply in a new auction organized by the military-owned National Service Project Organization (NSPO), on condition that they have “security clearance.”
In July 2014, NSPO head General Mostafa Amin Ali and Adel Salah, chair of the road authority’s board, signed two cooperation protocols.
The first stipulated that the road authority waived the right to license and manage ads on the ring road from the entrance of Field Marshal Tantawi Tunnel to that of Fatim Tunnel for 10 years. The NSPO would take on the authority’s role, with 60 percent of profits going to the authority and 40 percent to the NSPO.
The second protocol stated that the road authority waived the right to license and manage ads on the Tantawi and Fatim bridges, as well as their entrances and exits, for a period of 50 years — with the NSPO receiving 100 percent of profits.
The Chamber of Printing and Packaging Industries at the Federation of Egyptian Industries (FEI), a business collective representing advertising companies, then released a statement indicating that these protocols were in violation of the law stipulating that the General Authority for Roads and Bridges is not entitled to authorize other parties to deal with ad permits.
The statement said that although the protocols are not legal, the companies and agencies working on the ring road do not object to dealing with a different party for permits, “provided that this does not lead to an unjustified annulment of existing permits and payment of its dues.”
The problem arose when the roads authority, which until then had been responsible for licensing companies and collecting dues from them, committed itself to not renewing permits for any company or ad agency in the specified area.
The rights of the originally licensed companies have been violated, “threatening them with collapse and bankruptcy,” the statement reads, “not only because of immediate damage resulting from removal of their ads, but also because companies advertising through them require that the penalty clauses in the contracts between those companies and their clients be implemented.”
One company owner told Mada Masr that eight companies managing 35 advertisements in the area are affected. These permits, which do not expire until 2015, cannot be annulled except by a court order, he added.
The affected companies and the advertisement department obtained an administrative court ruling to stop the scheduled auction due to its illegality, and annul all its consequences.
“We were surprised though,” the owner said, “to receive a phone call from General Adel Morsi, assistant to the minister of defense, informing us that the auction would take place as planned. And in fact it did take place, but its results have not been announced.”
Despite receiving a court order on September 9 to cancel the auction and its results, they had postponed it instead.
The road authority had refused to provide companies participating in the auction with the conditions of tender until they obtained security clearance, which resulted in the exclusion of several companies.
Ashraf Khairy, head of the advertising department at the Chamber of Printing and Packaging Industries, told the Borsa newspaper in September that the chamber will call for a general assembly meeting to decide what steps, if any, to take with regard to the 14 companies that participated in the auction, among them the Tarek Nour Company, one of 10 companies with franchise advertising on the ring road.
No advertising agency affiliated to national press institutions participated in the auction or joined the lawsuit filed by the eight companies affected by the cancellation.
“We will file a lawsuit against the minister of defense, the head of the NSPO, the minister of transport and the chair of the road authority’s board for refusing to implement a court ruling,” the company owner told Mada Masr.
But Khairy was more conciliatory. He told Mada Masr that a delegation from his department met with the assistant to the defense minister in an attempt to resolve the situation.
“They asked us to prepare possible solution scenarios,” he said. “We’re supposed to meet with General Mostafa Amin, head of NSPO, and hope to reach a solution.”
The military holds a large share of Egypt’s economy, and economic commentators have suggested that military industries and military-associated companies have unfair advantages over other businesses.
Numerous Egyptian companies are NSPO-affiliated, including MP for Engineering Projects, Consultancies and General Supplies, established in May by Ibrahim Younis, a recent minister of military production. It enjoys financial and administrative independence, and one activity in its broad remit is advertising.
Other NSPO-affiliated companies include El Nasr Company for Intermediate Chemicals, the Arish Cement Company, the National Oil Production Company, the National Company for Production and Bottling of Natural Water (SAFI), the Macaroni Queen Company, the National Company for Land Reclamation and Agriculture, El Nasr for Services and Maintenance (Queen Service), the Upper Egypt Company for Agricultural Industry and the Linoleum Production Factory. The food security department is also affiliated to the NSPO.