Future of Egypt: ‘A law that regulates the absence of law’

After operating for over four years without a declared legislative framework, the House of Representatives gave final approval on Tuesday to a bill reorganizing the Future of Egypt for Sustainable Development Authority. The executive branch submitted the bill to Parliament on July 6, which included a proposal to transfer the authority’s oversight from the Defense Ministry to the president. It was then referred to a joint parliamentary committee comprising the Constitutional and Legislative Affairs Committee and the bureaus of the chamber’s other committees, which met on July 8 and 9. The committee introduced amendments and added new provisions before sending the draft to the plenary session, where debate began on Tuesday and concluded with its final passage on Wednesday, in the presence of the authority’s executive director Colonel Bahaa al-Ghannam. The bill grants the authority sweeping powers, effectively allowing it to replace most state administrative bodies operating within what it defines as “sustainable development zones,” while also empowering it to consolidate and manage state-owned assets. A source close to both the government and Parliament tells Mada Masr that the draft law had been sent from the presidency to the government without being reviewed by the Cabinet’s advisory council, the body responsible for examining all government-sponsored legislation for legal soundness and drafting before it is submitted to Parliament. During discussions in the joint parliamentary committee, which included MPs, political liaison officials from ministries and representatives of the authority, ministry representatives voiced their dissatisfaction with the bill — or, at best, remained silent — for its erosion of the powers of many ministries, the source says. Instructions were later issued limiting attendance at the remaining meetings of both the joint committee and the parliamentary plenary to the parliamentary affairs minister alone, according to the source and two parliamentary sources. Several MPs took issue with the absence of government representatives beyond the parliamentary affairs minister and went on to criticize the government for failing to bring about a surge in economic development, one lawmaker says. The government has become the weaker party and an easy target for criticism, the source argues, particularly because the bill was driven by “the frustration of higher authorities with the government’s failure to achieve high growth rates or deliver development.” Several MPs also warned that the bill effectively empowers Future of Egypt to usurp the government’s role, sparing only the ministries of religious endowments and youth and sports, the three sources say. The source close to the government and Parliament said the bill was being pushed through the current Parliament “under threats,” an assessment echoed by the two parliamentary sources, who say MPs inclined to oppose the legislation faced intense pressure to dissuade them. As one of them put it, “There was a desire for the law to pass unanimously.” Meanwhile, the source close to the government and Parliament attributes the delay in introducing the legislation, despite the authority having operated for more than four years, to the time Future of Egypt spent studying every aspect of how the state apparatus functions. Only then, the source says, was it possible to draft legislation with a clear understanding of its objectives and mechanisms. Retroactive legalization In 2022, President Abdel Fattah al-Sisi issued a decree establishing the Future of Egypt authority as an economic entity affiliated with the Air Force under the Defense Ministry. The decree was never published in the Official Gazette. It was followed by a series of presidential and government decisions allocating vast areas of state land to the authority and granting it responsibilities across a range of sectors, including agriculture, food supply, tourism, mining, real estate development and others. Throughout that period, however, the authority’s legal status, administrative structure, internal decision-making mechanisms, oversight of its investments and asset management, as well as the rules governing its finances and other aspects of its operation, remained undisclosed. The new bill seeks to formalize those arrangements. It stipulates that all land transferred to the authority prior to the law taking effect will be designated as “sustainable development zones,” or land owned by the authority, equipped with the necessary infrastructure and allocated for national or economic projects. Projects established in these zones will enjoy the same exemptions, incentives and benefits granted to free zones. The law also provides for the continued implementation of protocols on delegation of authority, memorandums of understanding and other joint arrangements concluded between Future of Egypt and state bodies, until those agreements expire. It preserves the validity of financing agreements concluded with public entities before the law’s enactment until they are fully implemented, and allows employees seconded or assigned to Future of Egypt to remain in place until its organizational and staffing structure is completed. The bill also states that “the public treasury is obligated to provide the financial appropriations necessary to pay the authority’s outstanding insurance contributions, taxes, fees and other financial obligations accrued before this law enters into force.” Former Egyptian Tax Authority head Ashraf al-Araby tells Mada Masr that this is among the bill’s most significant provisions. He explained that since the enactment of Law 159/2023, economic and investment activities carried out by state-owned entities can no longer be exempted from taxes and fees. The legislation, passed by Sisi, was part of the government’s commitments to the International Monetary Fund at the end of 2022 under its State Ownership Policy Document, which classified military-owned companies as state-owned and committed to subjecting them to the same tax and financial reporting rules as their civilian counterparts. During 2023 and 2024, the tax authority began collecting taxes from entities and companies affiliated with sovereign institutions, including military-run clubs and hotels, Interior Ministry clubs and companies linked to sovereign bodies such as the Administrative Capital for Urban Development. The provision requiring the public treasury to settle Future of Egypt’s outstanding taxes, fees, fines and late-payment penalties from the period before the law takes effect indicates that these obligations had not been paid since the authority began operating, Araby adds. Law 159/2023, issued by Sisi, abolished tax and fee exemptions previously granted to state entities for their economic and investment activities. The law’s executive regulations, issued by the prime minister in February 2024, clarified that the ban applies to all state bodies, their companies and public authorities, including sovereign institutions. A special nature The Future of Egypt bill sets out a wide range of exemptions and privileges for the authority while granting it open-ended powers, tied to whatever activities the president assigns to it and whatever assets he transfers under its control. A judicial source describes the legislation to Mada Masr as akin to “a law that regulates the absence of law while suspending the application of other laws.” Under the bill, Future of Egypt reports directly to the president as “a national body of a special nature enjoying technical, financial and administrative independence.” Exemptions Under the law, the Future of Egypt authority is exempt from eight laws: the public sector authorities law, the Central Agency for Organization and Administration law, the legal departments law, the public sector companies law, the public business sector law, the maximum wage law, the civil service law and the law governing public procurement. These exemptions free Future of Egypt from the administrative and financial constraints that govern state institutions in areas such as hiring, pay, contracting and public tenders, effectively placing it on a footing closer to that of the private sector. The law also shields contracts finalized by the authority, as well as by its sovereign and service funds, from legal challenges by anyone other than the contracting parties themselves. The same protection applies to decisions allocating state-owned real estate to the authority. Courts are required, on their own motion, to dismiss any lawsuit or appeal brought against Future of Egypt by parties who are not signatories to the relevant contract. Broad mandate The law assigns Future of Egypt an expansive mandate spanning four objectives: contributing to food, water and energy security; supporting the development of the national economy and strengthening its regional and international standing; ensuring the sustainability of the state’s sovereign wealth for the benefit of future generations and assisting the state in achieving social justice and expanding social protection. Parliament introduced only one amendment to these objectives, requiring Future of Egypt to coordinate with the Water Resources and Irrigation Ministry on matters related to water security. It did not impose a similar coordination requirement with any other ministry. New assets Despite the breadth of its mandate, Future of Egypt’s powers ultimately depend on future presidential decisions. The law defines the authority’s jurisdiction along two dimensions. The first is functional, covering economic and service activities. The second is geographic, through “sustainable development zones,” which Future of Egypt is empowered to identify, develop and administer. A sustainable development zone is established by presidential decree upon the proposal of Future of Egypt’s chair and with the approval of its board of directors. Following amendments introduced by Parliament, the decree must be presented to the House of Representatives at its first plenary session. Once a zone is established, ownership of all state-owned land and facilities within its boundaries is transferred to the authority, along with all rights and obligations arising from existing contracts and transactions related to those assets. Within one year of the zone’s creation, the president is also required to issue a decree setting its policies, operating plans and fees, without the need for review by any other body. Parliament added a further provision stipulating that all fees and financial revenues previously due to public entities, from national and economic projects and related activities within the zone, will instead accrue to Future of Egypt. The law grants the authority full administrative jurisdiction within sustainable development zones. With the exception of matters falling under the Defense Ministry, it becomes the sole administrative body responsible for implementing the regulations in force within those areas, including establishing and operating public utilities and managing projects and activities. Within the zones, the authority’s chair is vested with all powers exercised by ministers, governors, heads of public authorities and other government and public utility officials. The law also authorizes the president, after consulting the relevant minister and the owning entity, to transfer ownership of any state-owned private assets, whether in use or not, to the Future of Egypt authority. It also permits the transfer of state-owned shares or stakes in companies, or the transfer of wholly state-owned companies. Moreover, the president is empowered to allocate or lease state property or assets owned by public legal entities to Future of Egypt or its affiliated entities free of charge, for a nominal rent or below market value for national, strategic or public interest purposes. Such decisions are issued by presidential decree based on a proposal from the relevant minister or asset-owning authority, accompanied by a justification, and take effect immediately without requiring any additional approvals. Economic advisor and capital markets expert Wael al-Nahhas views Future of Egypt’s expansion into agricultural projects as a positive development. But he warns that the authority could become a tool for consolidating state assets ahead of selling them, using them as collateral for loans or swapping them for a portion of Egypt’s foreign debt. He is concerned that the legislation reflects ideas about debt restructuring that have surfaced repeatedly in the past but were each time met with broad political and public opposition. In his view, Future of Egypt may represent a new iteration of those ideas, but through a newly established institution that lacks the symbolic weight of bodies such as the central bank or the Suez Canal Authority. Last year, Egyptian businessman Hassan Heikal proposed what he called the Grand Swap, where the aim is to “zero out” or “reduce” Egypt’s domestic public debt — estimated by him at LE11 trillion or US$200 billion — by exchanging it for state-owned assets. Under the proposal, these assets would be transferred to a new fund to be established and managed by the Central Bank of Egypt. Heikal later identified the Suez Canal as either an alternative to, or a complement for, the assets to be transferred to the CBE, with a total value equivalent to domestic debt. The greatest risk, Nahhas argues, is that Future of Egypt could eventually borrow against the assets transferred to it or list stakes in its subsidiaries on domestic and international stock exchanges to raise liquidity, without any clear legal obligation requiring the proceeds of such transactions to return to the state or generate a direct social benefit for citizens. He links that scenario to Egypt’s broader liquidity crisis, explaining that the state’s annual revenues amount to around LE4 trillion, while its yearly obligations approach LE8 trillion. The resulting financing gap, he says, forces the government to rely on domestic borrowing at interest rates of between 22 and 25 percent, while also incurring additional costs to attract dollar-denominated deposits from Gulf partners — factors that only deepen the country’s debt burden. Limited returns for the state treasury While Future of Egypt garners praise for its success in attracting private-sector partnerships by consolidating land, assets and resources under a single entity, questions remain over where the economic returns generated by the authority ultimately go, and whether citizens benefit from them directly. The bill provides a clear answer. It exempts both Future of Egypt and its sovereign and service funds from the law requiring certain public entities to transfer a fixed share of their balances or budget surpluses to the state treasury. Instead, it authorizes the president to determine what proportion of the authority’s surpluses and returns, as well as those of its two funds, will be transferred to the treasury. Sources previously told Mada Masr the law’s vague exemption provision appears designed to shield politically powerful entities. The explanatory memorandum accompanying the bill states that such transfers are intended to meet the state’s needs in certain circumstances, including covering emergency government expenditures, helping reduce the budget deficit or supporting the public treasury. Economist and former deputy head of Parliament’s Industry Committee Mohamed Badrawy argued that one of the bill’s main shortcomings is that Future of Egypt’s investments should not merely generate enough revenue to cover operating costs and expand its assets. A clear share of those returns, he says, should also flow back to citizens. It is unreasonable, he adds, for Egyptians to have borne the costs of taxes and value-added tax associated with the authority over recent years, without seeing any tangible economic benefit in return. For Badrawy, the central issue is not whether Future of Egypt’s projects succeed or fail, but what happens to the proceeds they generate. Under the bill, the authority’s revenues and privately held funds remain with the authority, accumulating year after year, with no clear mechanism for returning them to the state treasury or the public beyond the limited shares the law permits the president to transfer. He argues that whenever public assets are converted into privately held assets, the law should explicitly require that a defined share of the investment returns be directed back to the state and its citizens, just as a private investor retains profits while also creating jobs through a project. In its current form, he said, the bill lacks any clear mechanism specifying how or when the “returns on development” will reach society. Self-governance Future of Egypt is governed by a board of directors appointed by presidential decree for renewable four-year terms. The board consists of a chair and an even number of members, between eight and 14, with expertise in finance, economics, law and investment. The chair is accorded the rank of a minister. The board serves as the authority’s supreme governing body, exercising around 34 powers that combine legislative, executive and quasi-judicial functions. These include issuing internal regulations, approving plans, budgets and investment policies for the authority’s sovereign and service funds, and imposing financial penalties and setting fees and licensing requirements without being bound by any other law or requiring approval from another authority. During its review of the bill, Parliament’s Legislative Affairs Committee introduced several amendments requiring Future of Egypt to provide reasons for disciplinary decisions and granting those affected the right to appeal them. It also removed the board’s authority to propose the criteria for classifying projects as “national projects,” citing concerns over potential conflicts of interest, and required the board to submit its annual report to the Parliament speaker in addition to the president and the prime minister. The judicial source says Future of Egypt effectively establishes a parallel state by taking over powers currently exercised by ministries, institutions and public bodies, whose activities are regulated by law and whose revenues and expenditures are subject to oversight. These functions, they argue, are removed from the scope of inspection on the grounds that the authority reports directly to the president. The source explains that Parliament cannot directly hold the president to account except in cases of high treason or gross misconduct. In practice, parliamentary oversight is exercised over the government and the prime minister as head of the executive branch. Consequently, placing an institution directly under the president — who already exercises exceptional legislative and executive powers without being subject to routine parliamentary scrutiny — effectively removes that institution from existing frameworks of accountability, whether parliamentary or governmental. Badrawy likewise argues that the legislation seeks to divide the administration of the state, leaving ministers, governors and heads of cities and districts responsible for public services and facilities, while assigning management of state land and economic activities to the authority. The bill is consistent with the unsuccessful governance approach adopted since 2014, he says, under which government functions have increasingly been transferred to bodies affiliated with sovereign institutions. The post Future of Egypt: ‘A law that regulates the absence of law’ first appeared on Mada Masr.