Redress sought as Egypt halts new plant

By Heba Saleh in Cairo
Published: July 25 2008 03:00

Egypt is being pressed by a Canadian company for compensation after construction of a $1.4bn fertiliser plant on the country's Mediterranean coast was halted in a case closely followed by foreign investors.
Agrium, a fertiliser manufacturer, says that along with its partners and international banks it has already invested $500m (€317m, £250m) in the project and that it would "aggressively" pursue full recovery of its costs, equity contribution and lost profits.
Parliament recommended in June that the plant be moved to another location in response to local protests triggered by concerns about potential damage to health and the environment.
But the government's decision to abandon the venture, of which it owns a third through state companies, surprised the business community especially as the current cabinet prides itself on its record in attracting foreign investment.
Ahmed Nazif, prime minister, cited Agrium's inability to forge a local consensus on the safety of its project as the main reason for halting it.
"The important thing if you are a foreign investor is how amicably and quickly a settlement is reached," said Simon Kitchen, economist at EFG-Hermes, the Cairo-based private investment bank.
"Any investment in an emerging market can face hiccups, but the question is how helpful is the government in resolving the dispute. It's not just foreign companies that are watching this, but also banks which provide finance because Agrium had to borrow for this project."
Agrium has not revealed any details of its discussions with the authorities except to say they are focusing on giving it a stake in a government-owned fertiliser plant in the industrial zone at the port of Damietta, a site adjacent to that of the aborted project.
Yet in a country where environmental considerations are often overlooked and where public opinion holds little sway, observers remain uncertain whether the demise of the project is a victory for civil society or whether the public has been used by hidden and more powerful interests.
Certainly feelings in Damietta have been running high with many people fearing the plant would be environmentally damaging.
"We have no statistics, but we have many cases here of renal failure," said Gamal El Beltagi, a trade unionist and one of the activists opposing the project. "The furniture industry is concentrated here and it creates pollution at every stage. We don't need Agrium here [as well]."
Unusually for Egypt, the local government authorities supported the anti-Agrium protests. They say they have earmarked for tourism the land on which the project was to be built.
But Agrium says it ob-tained all the necessary permits from a long list of official bodies, including the environment ministry.
Some speculate the uproar may have been instigated by property developers. The site of the project is bordered by both the sea and the Nile and it is only a few kilometres away from the popular beach resort of Ras el Barr.
Copyright The Financial Times Limited 2008