3 Persistent hotspots of industrial pollution

Managerial networks, state-ownership, and poor environmental performance

In a slim volume entitled Buhayrat al-Mawt (Lake of Death), published in 1990, the Egyptian lawyer Ahmad Qazamil chronicled the destruction of Egypt’s Lake Manzala through increased flows of wastewater from industry, cities, and agriculture (Qazamil, 1990). While numerous government reports had documented the degradation of the lake, the authorities had done little to slow these processes. Qazamil’s account of Lake Manzala’s deterioration and the lack of effective remediation applies equally well to the other northern lakes of the Nile Delta. Up until the 1980s, the “four sisters”—the coastal lagoons of Lakes Maryut, Edku, Burullus, and Manzala—were highly productive fisheries, sustaining thousands of families. For the past two decades, however, they have served largely as waste basins, receiving the discharge of major irrigation canals, agricultural drainage networks, and sewage systems from Cairo and the Nile Delta (Lajna al-Khadamat, 1992: 25). In Lake Maryut, fish catches have declined dramatically and large portions of the lake are eutrophic, with 60 percent of its dwindling water area covered in aquatic vegetation (Alvarez and Beevers, 2009).

For Lake Maryut, on the western side of Egypt’s second largest city, Alexandria, Egyptian scientists and international aid agencies have long documented the sources and consequences of the lake’s pollution loads. In 1978, the United States Agency for International Development (USAID) released one such study. USAID was concerned about the discharge of concentrated industrial effluent into a new treatment plant and sanitation network funded largely by American aid. Since concentrated industrial wastewater shortened the life and effectiveness of the new sanitation infrastructure, USAID’s consultants recommended immediately stopping the direct discharge of industrial wastes from tanneries, petroleum companies, power stations, and engineering firms into waterways, the lake, and the Mediterranean (Camp Dresser & McKee, 1978a: 10–32). As of 2009, however, many of these firms were still discharging directly into Lake Maryut and the nearby coastal bays of al-Mex and Abu Qir. These areas remained designated critical “hotspots” of pollution, not only in Egypt but the Mediterranean as a whole (El-Kholy and Beltagy, 2002).

Adequate legal standards for industrial pollutants have been in place in Egypt since 1994, when Parliament passed a comprehensive environmental law. Yet few firms have taken compliance with these standards seriously. A 2006 survey of the fifty-five largest industrial firms in Alexandria remarked on the “‘soft’ enforcement of the environmental regulations,” that encouraged firms to adopt an “adaptive strategy of ‘soft’ implementation” (El-Zayat et al., 2006: 213).

In the 2006 survey, all fifty-five companies reported receiving inspections from the Ministries of Health, Labor, and Environment during the previous year. All reported that they had been cited for exceeding regulatory standards, while 36 percent reported receiving fines, though often for paltry amounts (ibid.: 209). Based on interviews with firm managers responsible for environmental compliance, the survey authors concluded that “most respondents were fairly acquainted with the environmental regulation…and seemed convinced that the regulations were reasonable and should be followed” (El-Zayat et al., 2006: 210). Awareness of environmental laws, citations, and fines, however, did not translate into firms taking substantive measures to reduce pollution. Over half of the firms surveyed (58.2 percent) had no wastewater treatment system in place, while 60 percent had no air pollution control equipment (ibid.: 212). The majority (63.6 percent) did not keep a complete environmental register as required by Egyptian law, and 18.2 percent kept no register at all (ibid.: 210).

While firm awareness of environmental issues and regulations has increased since the passage of Law 4 in the mid-1990s, as have routine environmental inspections, these measures have not resulted in firms making consistent efforts to control pollution. In this chapter, I analyze why “soft enforcement” and halfhearted compliance persists among some of the most polluting firms in Egypt. Most gravely polluting firms in Egypt are state-owned enterprises (SOEs) or quasi-privatized entities under a variety of hybrid state–private ownership arrangements. Regulatory initiatives and international environmental aid have prioritized these firms as the worst environmental performers, funding “pollution prevention” and “clean production” initiatives. These approaches to pollution control identify a variety of measures to reduce consumption of inputs, improve production efficiencies, and generate less pollutants per unit of production, some of which cost little to implement.

I argue, however, that these approaches to pollution control rely on assumptions about firm behavior in market economies, which did not match decision-making by public sector firm managers in Egypt’s transitional political economy. Rather than embracing pollution prevention, state-owned and newly privatized firms engaged in protracted bargaining with government ministries and international donors for packages of external assistance, under the rubric of comprehensively modernizing production and upgrading their facilities. In such negotiations, pollution loads were a kind of asset, rather than a liability, as the greater the pollution loads, the more likely firms would receive outside assistance for “industrial modernization.” Because such packages were costly and time-consuming to put together, and were successfully implemented at relatively few firms during the 1990s and 2000s, gravely high pollution loads continued at many state-owned and partially privatized firms in the interim.

This argument is laid out as follows. The next section highlights the principal challenges of pollution control in state-owned and privatized firms in transitional political economies. I then turn to the political economy of industrial production in Egypt, focusing on trends in state ownership and the spatial distribution of industry. The subsequent sections analyze early, ineffective attempts to regulate pollution through law, the rise of managerial networks specifically focused on pollution control, and the discourses and initiatives put forward by managerial networks to tackle pollution loads. The limited success of these initiatives is examined in terms of the limited legal and infrastructural forms of authority wielded by managerial networks and by Egypt’s environmental agency.

Challenges of pollution control in transitional economies

Controlling pollution in political economies moving from state-led planning and investment in industry to greater private-sector ownership has long proved challenging, whether in Eastern Europe, the former Soviet Union, Vietnam, or China. In many cases, government initiatives at central and local levels have often been characterized as ineffectual. Some of the most commonly cited problems include competing priorities among central government ministries (Ohshita and Ortolano, 2006), concern about the costs of pollution control for struggling domestic firms, lack of effective civil society mobilization to press for more adequate enforcement, and inadequate capacity at the local level to enforce environmental laws (Morton, 2005). An additional challenge, identified particularly by scholars working on transitions from communism and state-led capitalism, is the proliferation of fragmented, hybrid ownership structures for firms that mix state and private ownership without clear lines of environmental accountability (Hellman, 1998; Ho, 2005). Such hybrid property forms are often explicitly promoted by government investment laws that create industrial free zones, investment zones, and other enclaves where existing regulatory frameworks are suspended to attract private capital (Tan, 2002: 336).

SOEs have historically lacked effective management mechanisms, with firms subject to conflicting demands from the political leadership, government ministries, and workers (Luong and Weinthal, 2010; Waterbury, 1993). In particular, governing elites and enterprise managers are tempted to use the revenues of SOEs for a variety of political, populist purposes, creating weak systems of accountability and limiting mechanisms for internal and external scrutiny (Luong and Weinthal, 2010). At the same time, many SOEs are starved of reinvestment funds necessary for adequate pollution control. SOEs are often required to sell their goods and services at below-market prices for domestic consumption (an indirect subsidy), overstaff their factories to provide employment, and undertake grandiose “prestige projects” that provide patronage opportunities for political leaders (Ascher, 1999; Waterbury, 1993). These political functions are rarely matched by predictable reinvestment and SOEs are typically starved of the resources necessary to invest in new production lines, upgrade technologies, and produce competitive products. The result is pollution loads that often far exceed those predicted in the original specifications for a given technology.

Kornai’s classic work on the behavior of state-owned firms under command economies helps explain the ensuing incentives for firm managers vis-à-vis the state. Many state-owned enterprises enjoy a monopoly or an oligopoly on the production or distribution of goods and services, or supply a politically important sector (such as fertilizers, oil, or chemicals). Hence they are well positioned to bargain within the state bureaucracies for outside budgetary assistance since they are too large to fail (Kornai, 1992: 124). In Kornai’s terms, SOEs in a command economy encountered a soft budget constraint, where they could consistently expect outside assistance irrespective of profitability (ibid.). As Luong and Weinthal note, governing elites and enterprise managers therefore typically engage in “implicit bargaining, which not only increases opportunities for corruption but also reinforces personalism as the basis for allocating resources” (Luong and Weinthal, 2010: 49).

Tightening the soft budget constraint, however, can also produce disincentives for firms to undertake costly investments in pollution control. Programs of privatization, liquidation, and economic restructuring of the public sector often make managers at state-owned enterprises and sectoral holding companies risk-averse, focused primarily on firm survival (Tan, 2002: 337). In China, state-owned enterprises were restructured into entities jointly owned by local governments and townships. These municipally owned firms often emphasized extraction of short-term profits over costly environmental investments. That is, local townships searching for revenue tightened budget constraints on their enterprises, but in doing so they constrained the ability of firms to invest in significant upgrades of technologies and production lines. Such was the case in the coal sector, where firms chose not to invest in costly, cleaner coal technologies in the face of local government pressures for short-term financial returns (Ohshita and Ortolano, 2006: 84–6).

Despite these obstacles, several countries have successfully promoted pollution control in particular economic sectors during transitions from command economies to market-oriented ones. The Czech Republic successfully imposed “hard environmental constraints” on the steel sector in the decade following the end of state socialism in 1989 (Novy, 1999). This achievement came about through a combination of credible regulation, tightened budget constraints on enterprises, significant privatization, and a progressive system of fines (ibid.). The Czech government eliminated subsidies and government loan guarantees to the steel sector, moved rapidly on privatization, and lifted wage and price controls. Strengthening budgetary constraints on enterprises was accompanied, however, by the government’s reinvestment of pollution control fines into an environmental investment fund that provided loans to firms for pollution control (ibid.). The government assessed charges on every unit of pollutant emitted, regardless of whether these were above legal standards; for every unit in excess of statutory standards, fines were increased. Firms paid these fines into the environmental fund that awarded low-interest loans and grants, but (crucially) not necessarily to the same firms that had paid punitive damages (ibid.).

As importantly, the government also established positive incentives for environmental performance and clearly specified environmental liability for privatized firms. The government offered managers of state-owned firms the option to buy up to 15 percent of the shares in newly privatized companies if the companies met environmental standards and adopted newer technologies. For private investors, privatization agreements specified targets for remediation and limits on liability, while in some cases the government allocated privatization funds to compensate investors for cleanup costs (ibid.: 275). There were two additional conditions in the Czech Republic’s steel sector that enabled these environmental achievements. First, significant pollution reductions could be achieved right away through relatively modest investments. Second, market demand remained strong for the products in question, generating revenue to pay environmental fines and restructuring costs. These conditions hold for some Egyptian industrial sectors but by no means all.

In contrast to the Czech Republic, the Egyptian government never pursued a consistent or sustained transition to a market economy. In the decades since Sadat announced the policy of infitah, the (re)opening of the economy to private domestic and foreign investment in 1974, the regime enacted market reforms fitfully. The government lacked a clear public mandate, particularly as the benefits accrued largely to a relatively small number of elite business conglomerates in the public and private sectors. Privatization of SOEs was conducted independently of pollution control efforts. Indeed, as one bank president noted, potential investors faced significant uncertainty regarding future environmental liabilities arising from old state-owned enterprises, as the government had established no clear guidelines for environmental responsibility.¹

Similarly, managers at state-owned enterprises were not provided with clear incentives to enact pollution control through systems of progressively strict fines or shares in newly privatized companies. Instead, Egypt’s SOEs encountered layers of governmental authorities with nominal oversight of firms, including central ministries and the sectoral holding companies (such as the Holding Company for Chemical Industries). These agencies held often conflicting agendas regarding firm restructuring and lacked a commitment to prioritizing pollution issues. In order to appreciate what was at stake in efforts to oversee pollution control at SOEs, the next section provides an overview of the political economy of industrial production in Egypt, focusing on the spatial distribution of industry and resultant health hazards.

The political topography of industrial pollution in Egypt

Co-location of industries, urban population, and fresh waterways

In 2007, the Ministry of Industry reported that there were 28,184 registered industrial facilities in Egypt (Ministry of State for Environmental Affairs, 2009: 231). Many large polluting enterprises are within or adjacent to densely populated cities and limited freshwater sources, making industrial pollution a significant health threat to many Egyptians. Most old industrial enterprises are concentrated in a handful of densely populated urban suburbs. New cities and designated industrial zones originally located outside of urban areas are now on the outskirts of burgeoning conurbations, fueled by population growth and rural-to-urban migration. As expanding urban areas engulf industrial areas, and population density increases in old residential–industrial areas, a significant number of Egyptians live in close proximity to industrial pollution. This problem persists despite ongoing efforts to create new industrial cities in the desert and attempts to relocate particularly hazardous small and medium enterprises, such as lead smelting operations, to new desert locations. In recent years, new facilities producing petrochemicals, fertilizers, and related industries have been sited near established cities, particularly ports with good sea and land transport linkages (Figure 3.1).

Industrial enterprises of all sizes remain particularly concentrated in and around Egypt’s two traditional metropolitan areas of Cairo and Alexandria. Egyptian environmental officials often claim that Greater Cairo and Alexandria contain approximately 80 percent of the industrial activities in Egypt, though this accounting reflects only formally registered firms, excluding vast numbers of small and informal enterprises (Hamed and El Mahgary, 2004). In recent years, the Greater Cairo metropolitan area has continued to receive the largest share of private industrial investments, with additional new investment gravitating to industrial zones in the northern Delta and along the Suez Canal.²

Within Cairo, heavy industry has long clustered in the northern suburb of Shubra al-Khayma and the southern suburb of Helwan. In 2008, the environmental agency reported 1,300 to 1,900 registered industries in these areas, including smelters, iron and steel foundries, chemical and metals plants, kilns, potteries, brick, textile, and car factories, and oil refineries (Ministry of State for Environmental Affairs, 2009: 39). The neighboring urbanized governorates of Qalyubiyya and Giza are also highly industrialized, as are adjacent, rapidly urbanizing areas, such as Kafr al-Zayyat. State policy of relocating industry to “new” industrial sites, such as Kafr al-Zayyat, often merely displaces pollution to new areas if undertaken without substantial investment in pollution control and ongoing enforcement efforts.

The confluence of urban populations and industrial areas emerged in the late nineteenth century. Private industrial investment focused on Cairo and Alexandria since these cities were close to waterways, trading houses, banks, and key transport routes (Mabro and Radwan, 1976: 93). The northern Cairo district of Shubra al-Khayma, for instance, became a center of textile manufacturing and power generation, while the southern suburb of Helwan, once famous for its hot springs,

became the emblem of the industrial era and its attendant pollution with the establishment of two cement plants, Tura Cement in 1927 and Helwan Cement in 1929. Several towns near Alexandria, particularly Kafr al-Dawwar, expanded with the spinning and weaving of cotton textiles during the interwar period along freshwater canals such as the Mahmudiyya, which supplies Alexandria with Nile water.

As with textile firms, most industries rely on access to a reasonably clean water supply. Clusters of heavy and intermediate industries are often thus located near freshwater intakes from irrigation canals, the Nile River, and the northern coastal lakes, discharging effluent directly into drainage canals, lakes, shallow manmade ponds, or wells. Water is used and reused as it flows through the Delta, distributed through an elaborate network of irrigation and drainage canals, with some seeping into the shallow aquifer underlying the river system. Eventually, in much reduced volume, flows of water terminate in the northern lakes or in discharge to the Mediterranean in the form of agricultural drainage and urban—industrial wastewater.

Nationalization of industry under Nasser, 1957–67

The expansion of state ownership in industry under the Nasser regime intensified industrial pollution loads in urban areas. Following the overthrow of the monarchy and the advent of military government under Nasser, the new regime eliminated the private “haute bourgeoisie” between 1957 and 1967 by nationalizing, either wholly or through majority shares, the banking, mining, manufacturing, public transport, and insurance sectors, as well as leading retail stores (Abdel-Malek, 1968; Issawi, 1963; Waterbury, 1983). By 1966–7, 95 percent of industrial enterprises employing 500 or more employees were state-owned, while 65 percent of firms employing 100–499 workers were also under state ownership (Mabro and Radwan, 1976: 97).

The Egyptian government, like other developing countries during this period, looked to state investment in heavy and intermediate industry to transform their economies, at the expense of investment in social services and agriculture (Kornai, 1992: 171–80). Influenced by the Soviet model, the regime created a Ministry of Industry in 1956 and presented its first Five-Year Plan that year. Through injections of foreign financing from the USSR, the United States, and other countries, and its extension of control over agricultural revenues, the state mobilized US$1.4 billion for the industrial sector between 1960 and 1965 (Waterbury, 1983: 85). Public-sector investments in intermediate goods, such as chemicals, metals, paper, refining, and basic engineering, accounted for 46 percent of all public investment between 1957 and 1965, although many of these projects were not completed until the 1970s (ibid.: 193). The government nationalized and expanded existing industrial establishments in Helwan, Mahalla al-Kubra, al-Mex, and Shubra al-Khayma. New projects were started in Suez, the middle Delta, Abu Qir outside of Alexandria, Aswan, and Nag ‘Hammadi (Lajna al-Khadamat, 1992: 23). Hydropower made available by the completion of the Aswan High Dam also prompted new industrial investments, such as the Kima fertilizer plant and aluminum smelters near Aswan in Upper Egypt.

The devastating consequences of the 1967 war with Israel, including the loss of the Sinai Peninsula, restricted government investment in industry. By 1974, the dominant role given to state-owned enterprises and public bureaucracies in controlling investment, prices, and output in the economy had produced economic stagnation, shortages, and a scarcity of private sector investment. The result was infitah, or opening the Egyptian economy to foreign and domestic investment. Infitah also reflected the strategy of Nasser’s successor, Anwar al-Sadat, to revive Egypt’s economy through rapprochement with the United States.

Return of the private sector, 1974—present

Sadat’s policy of infitah liberalized investment laws and trade regulations, and established incentives for foreign and domestic private investment. These incentives included long-term tax exemptions, cheap land, state-subsidized infrastructure, and exemptions from import and currency exchange restrictions (Law 1943 of 1974, modified 1977 and 1989). New company laws were introduced (Law 159 of 1981), which allowed Egyptians to once again establish companies without government participation. The government established the General Authority for Industrial Development (more recently the Industrial Development Authority), which designated several industrial free zones, including some of the new industrial cities on the outskirts of Greater Cairo. While interest among investors was initially limited, by 2005 approximately 2,700 factories had located to the industrial zones in the new towns. Concentrated particularly in the cities of Tenth of Ramadan and Sixth of October, these enterprises employed approximately 250,000 people, the vast majority of whom commuted from Greater Cairo and other established urban areas (Madbouli, 2005: 60).

The government also began to privatize state-owned firms. Throughout the privatization program, the regime was concerned with labor protest, fears of increased unemployment, and political criticism from opposition parties, syndicates, and other corporatist interest groups. As a result, periods of intensified privatization alternated with delays, though calls for re-nationalization of privatized firms were generally resisted. By 2010, 282 out of 314 state-owned enterprises slated for sale were partially or wholly privatized. Of these privatized firms, eighty-five were sold to anchor investors (private owners with majority shares), while another thirty-eight listed majority shares on the Egyptian stock exchange but significant shares were retained under state control, as shown in Table 3.1.

With the exception of anchor investments, many privatization transactions did not produce clear changes in ownership. Instead, firms were in essence quasi-privatized, and oversight authority was fragmented among public-sector banks, holding companies, and state officials. In terms of environmental accountability, quasi-privatization posed problems similar to those of state ownership.

Persistence of state ownership in industry

In addition to hybrid state–private ownership for many former SOEs, outright state ownership in pollution-intensive industrial sectors remains significant. The share of the private sector in GDP during the 2000s leveled out at slightly over 60 percent, as shown in Table 3.2.

Several factors account for the continued presence of state ownership in Egypt’s industrial sector. First, privatization opportunities were limited for some firms because investors proved unwilling to buy them, viewing them as unprofitable ventures. Second, Egypt’s natural endowment in fossil fuels provides a strong incentive for state ownership, as these resources supply hard currency to the government. In 2007–8, energy and energy products (the petroleum-related sector) still accounted for 50.3 percent of all export products.³ The oil and natural gas sector remains state-owned under the Egyptian General Petroleum Company (EGPC) and three affiliated holding companies, although multinational oil firms are involved via production-sharing contracts (United States Energy Information Administration, 2010).

The 2006 survey of large firms near and around Alexandria discussed at the outset of this chapter illustrates the continued importance of state ownership in industry. The survey classified ownership of large industrial enterprises in terms of five categories: the public (i.e. state) sector, the private sector, the EGPC, the investment sector, and the military sector (El-Zayat et al., 2006: 208). Of these, three are fully state-owned (the public, EGPC, and military sectors) while investment enterprises, formed under specific investment laws, are typically hybrid joint ventures between government authorities and private investors, either foreign or domestic (Waterbury, 1983). The majority of large industrial firms in Alexandria remained state-owned (61.8 percent), while nine were undergoing privatization at the time of the survey. The authors provided no indication of the numbers of firms affiliated with the military sector or the EGPC, nor state ownership in hybrid “investment firms,” reflecting the ongoing sensitivity of questions about state ownership in industry.

Industry and pollution

The intermediate and heavy industrial sectors favored in both state plans for investment and private capitalists are inherently large consumers of energy and materials, making them pollution-intensive. To compound these challenges, much of Egypt’s heavy industry established during the heyday of Egyptian–Soviet cooperation under Nasser is now outdated. Egypt paid for technology imports from the Soviet bloc via barter arrangements, using cotton and other exports as payment. Cooperation in industrial investment with the Soviet bloc later left many state-owned enterprises unable to acquire spare parts or adapt their Soviet-era production lines with the reorientation of Egypt’s political economy towards the West. In visits by the author to some of the most polluting state-owned industries during the 1990s and 2000s, it was common to see production lines dating from the 1960s and early 1970s, imported from Romania, East Germany, and Poland.

Industrial emissions are thus a significant contributing factor to severe air pollution in Egypt’s cities. For Greater Cairo, a 2001 source attribution study found that industrial emissions accounted for 32 percent of the total annual load for fine particulates, while open burning of solid municipal waste accounted for 36 percent. Vehicle exhaust made up 26 percent of air pollution loads, and open burning of agricultural waste another 6 percent (Ministry of State for Environmental Affairs, 2006). Egypt’s arid climate, which features little precipitation, seasonal temperature inversions, and seasonal sandstorms and winds (especially the khamsin winds in the spring), also contributes to acute episodes of air pollution. To compound matters, industrialized areas north of the capital, such as Abu Za‘bal and Musturud, are situated such that prevailing winds carry industrial pollutants and smoke from agricultural burning over the capital.

All of these factors combine to create the notorious “black cloud” (al-sahaba al-sawda’), prolonged episodes of intense air pollution that first appeared in the late 1990s and return each season to blanket the capital, often in the fall (ibid.: 39). When the “black cloud” first appeared, the columnist Salah Montasser reminded readers of the state-owned Al-Ahram Weekly that the “post-1952 ‘revolutionary’ governments” were partially to blame, as they built factories very close to the capital “for propaganda purposes” (Montasser, 1999).

Industrial loads to waterways also remain significant. At the beginning of the privatization process in 1992, the environmental agency estimated that 330 large state-owned industries consumed approximately 638 million m³ of water annually, 65 percent of which was drawn directly from the Nile. The report estimated that 80 percent of the 549 million m³ discharged by these facilities was untreated, with 57 percent discharged directly to the Nile and other irrigation channels, 21.5 percent to drainage canals, 12.9 percent to sewage lines, and 8.9 percent to lakes and estuaries (Egyptian Environmental Affairs Agency and Ministry of Industry, 1995: 22).⁴

Through the late 1990s and early 2000s, as confirmed by the author in visits to a number of large state-owned industrial facilities, only a few firms had invested in water treatment systems. Most used straight dilution techniques to lower concentrations of contaminants. Metal finishing plants, for instance, discharged wastewater contaminated with chromium, copper, and nickel directly to canals, ocean outfalls, or municipal sewage networks if they were connected to the system. Industrial plants without access to sewage networks often discharged wastewater to shallow drainage wells and unlined septic tanks. Since the Delta water table is only a few meters below the surface, it was likely that effluent was leaching into groundwater reserves.

As USAID had warned in Alexandria, industrial effluent discharged to municipal sanitation systems raises operation costs, shortens the longevity of these infrastructures as acidic effluent corrodes the pipes, and poses grave problems for sludge disposal. Industrial discharges to waterways not only adversely affect human and marine health, but also threaten government plans to treat and reuse wastewater for agricultural crops.

The military sector

Military enterprises, while a small number of Egypt’s total industrial firms, comprise a significant number of the most polluting firms. In the period of expansive state ownership under Nasser, new military-industrial districts, such as Abu Za‘bal and Abu Rawwash, were established in Cairo, while the regime also established military firms in established residential areas, such as the upscale suburb of Ma‘adi. Three governmental authorities—the Ministry of Military Production, the Arab Organization for Industrialization, and the National Service Products Organization—have long overseen (at least) twenty-nine large industrial enterprises associated with the military. These large-scale operations with large numbers of workers employ outdated production lines with heavy pollution loads.

Helwan Factory 9, for instance, operated the “biggest integrated complex of ferrous foundries for cast iron and steel casting in Egypt” in 1997, according to the company’s promotional literature. The company produces metal parts for spinning and weaving machines, cement factories, railway wagons, and water pumps, as well as for cannons, missiles, and launchers. Since goods produced are generally of poor quality and non-competitive in private markets, most military-owned firms primarily supply other state-owned enterprises.

Pollution loads at military plants are particularly acute. One environmental engineer recalled that while studying at Helwan University in the mid-1990s, training in sampling wastewater was conducted at several military production plants. He reported routinely measuring concentrations 500 times the legal standards.⁵ In 1999, only two companies under the Ministry of War Production reported having end-of-pipe facilities to treat chemical discharges, including chromium and other heavy metals (Hussein, 1999).

US–gyptian co-production of the M1 tank offers a further glimpse into the lack of environmental controls at state-owned facilities. In 1984 General Dynamics signed a contract with the government of Egypt for the construction and start-up of a tank facility. The facility enabled Egyptian policymakers to push successfully for a program of tank co-production during the 1990s, rather than importing complete tanks as preferred by US manufacturers (United States General Accounting Office, 1993). The United States provided tank technology in phased “packages,” enabling the United States to withhold critical technical elements. While these packages included quality control measures, neither the Egyptians nor the Americans created requirements for environmental controls, although several production processes used toxic materials that would have been subject to hazardous waste laws in the United States. A military attaché at the American Embassy in Cairo kindly provided a concrete example: the inside of tank cannons were plated with chromium, but there were no provisions to monitor either the volume applied or disposal.⁶

Military firms have also contracted with other public sector industrial establishments to supply environmental goods and services. The Engine Factory, one of the nine factories under the Arab Organization for Industrialization, expanded its services from the manufacture and repair of aircraft engines to include the design, installation, and maintenance of wastewater treatment plants. The Engine Factory secured contracts with eight publicly owned oil and soap companies for the installation and maintenance of such wastewater treatment plants, and bid for projects at five other firms (El Maadawy, 1999: 2). The Helwan, Abu Qir, and Abu Za‘bal Engineering Companies signed contracts with local governments to produce composting plants. The Ma‘sara Company for Military and Civil Industries produced not only machine guns and rifles, but also water meters under license from Andrae GmbH of Germany and three types of incinerators (ibid.).

Environmental services and technologies provided by these firms were often inefficient and outdated. In contrast to efforts by managerial networks to promote pollution prevention and clean production, as explored in subsequent sections, military-owned firms typically supplied end-of-pipe treatment technologies that simply diluted or displaced pollutants into other media.

Early attempts to regulate industrial pollution

Attempts to regulate pollution began in the early 1960s and were fragmented among government authorities responsible for different land uses and discharges into different media. Law 93 in 1962, under the authority of the Ministry of Housing and New Communities, specified standards for industrial and agricultural discharges to urban sewer systems, principally in Cairo, Alexandria, and the port cities. In 1969, executive decrees issued by the Ministry of Petroleum established procedures for oil pollution from petroleum exploration operations. The following decades saw additional Cabinet decrees, executive orders, ministerial edicts, and governorate proclamations aimed specifically at controlling various types of industrial pollution. A 1975 Ministry of Housing resolution set out guidelines for siting industrial enterprises near residential areas. In 1979, local administrative agencies were given authority to supervise industrial establishments in order to protect public health (Local Administration Code No. 43).

The government also passed a series of laws designed to address water pollution. The principal regulatory mechanisms employed in these laws were permit procedures for new industrial projects and the authority to suspend existing industrial licenses (Shawky, 1993). The Ministry of Industry, for instance, issued a 1982 decree that required new or modernizing factories, including foreign companies and joint ventures, to obtain a license specifying pollution control devices (Lajna al-Khadamat, 1992: 42). Law 38 (1982) authorized the Ministry of Irrigation to issue and revoke licenses of industrial projects discharging into the Nile (ibid.). The Ministry of Housing was tasked with sampling and analysis of wastewater discharged at specific facilities. Law 38 also appointed the river patrols of the Ministry of Interior to monitor pollution of the Nile River and canals. The river police, however, were hardly equipped to carry out sophisticated monitoring of water quality.

Parliamentary reports from the early 1980s reveal that the government was aware that these measures had been entirely ineffective, particularly with respect to state-owned enterprises. In 1985, an agreement was signed by the Ministries of Health, Industry, and Irrigation to implement twenty-five projects targeted at ameliorating industrial pollution from nineteen state-owned companies, at an estimated cost of LE75.3 million. But the money was not allocated and the projects were not implemented at that time (Qasim, 1993: 112). Similarly, the Ministry of Industry produced a study of environmental investments needed for state-owned enterprises between 1983 and 1987; recommendations for a series of significant investments at selected firms were disregarded in state budget allocations (ibid.: 110–11).

Managerial networks in pollution control

By the mid-1990s, international donors and environmental experts began calling for more substantive pollution control efforts at large industrial facilities. These efforts moved along two tracks: the creation of donor funds to support pollution control efforts at specific enterprises on the one hand, and attempts by environmental networks to establish rudimentary organizational capacities for pollution control at the environmental agency on the other.

For environmental experts, the most immediate challenge was the lack of basic, verifiable information about industrial pollution loads and firm responses. As the director of the Industrial Compliance Unit wrote in 1999, “Major sources of compliance information—industrial self-monitoring and reporting, inspections, citizen complaints, and ambient monitoring—are all inadequately functioning, if not non-existent” (Sharif, 1999: 3).

Monitoring of water pollution began in the 1980s by the Ministries of Irrigation and Health, with little coordination or information sharing between them. These efforts expanded during the 1990s and 2000s with donor assistance. By 2000, the Ministry of Irrigation monitored water quality along the Nile River, irrigation canals, and drains in 232 stations, and operated another 203 stations to monitor groundwater pollution (Ministry of Water Resources and Irrigation, 2005b). The Ministry of Health, responsible for potable water quality, ran 154 monitoring sites along the Nile and large canals, near intakes for drinking water plants and large polluting plants. The Ministry of State for Environmental Affairs (MSEA) operated its own smaller network along the Nile.

For air quality, ambient air monitoring of basic indicators only began in the early 1990s. The USAID-funded Cairo Air Improvement Project expanded the existing air pollution monitoring network in 1999. But monitoring stations quickly fell into disrepair and, in a few years, the agency reported that only a few were working. As with many donor-funded projects, the technologies and protocols for environmental monitoring reflected those employed in donor countries, regardless of their suitability to local conditions. With supplemental USAID funding, monitoring stations were renovated in 2004 and 2005 with additional stations brought online (Ministry of State for Environmental Affairs, 2006). By 2006, however, the coverage across all of Egypt was a mere fifty-four monitoring stations. Only thirteen of these were in industrial areas with high air pollution loads (ibid.).

Although the World Bank and other international institutions had developed simple protocols for sharing ambient pollution information with the public, based on color-coded alert levels disseminated by the local media, these practices were not adopted in Egypt. Thus, while donor-funded initiatives expanded air monitoring networks, there was almost no attempt to share this information with the public. Ambient monitoring also did not provide environmental experts with usable data on firm-specific pollution loads. As a senior consultant in the industrial compliance office noted in the late 1990s, “We simply had no information on pollution loads from the private sector, and only limited information on the public sector.”⁷

Framing pollution: hotspots, clean production, and pollution prevention

Egyptian environmental experts, beginning in the 1970s, had long argued that Egypt faced serious pollution loads in critical “hotspots.” These “hotspots” typically consisted of clusters of large, primarily state-owned industrial complexes. Some environmental experts hoped that by framing pollution in terms of hotspots, they could avoid politically sensitive questions about pollution loads from state-and military-owned firms. As one environmental scientist working as a consultant in the Industrial Compliance Office noted, “We have merely been trying to point out that there are pockets of high density pollution in Egypt—and totally unacceptable practices of polluting in these pockets.”⁸

Managerial networks of pollution control experts and consultants for donors and government ministries produced numerous maps and listings of pollution hotspots during the 1990s and 2000s. Experts used a variety of qualitative rankings based on risks to public health, drinking water, and economic productivity to identify such areas (El-Kholy and Beltagy, 2002: 50). Mapping pollution hotspots emerged as a regular feature of action plans, government investment plans, and donor documents regarding industrial pollution (Egyptian Environmental Affairs Agency and Ministry of Industry, 1995; World Bank, 2005b). These documents highlighted the same clusters of state-owned firms that had been well-known sources of pollution for decades. For instance, many of the same coastal Alexandrian firms listed in the 1978 USAID study as requiring immediate pollution abatement or closure appeared as major polluters in Egypt’s State of the Environment Report for 2008.

Alongside framing pollution in terms of hotspots, international donors and local experts promoted two approaches to pollution control that had gained widespread acceptance in industrialized countries during the 1990s, namely pollution prevention and clean production (Hamed and El Mahgary, 2004). Rather than focusing on end-of-pipe treatments, which often simply transferred pollutants from one medium to another, managerial networks argued that industry should focus on reducing pollution at the source. Key elements of these approaches, as outlined in a 1991 report on coastal Alexandria, included process modifications to reduce consumption of inputs and minimize waste, recycling and reclaiming of waste products, and incorporating environmental considerations in new technology decisions (Hamza, 1991: 2–7).

Of the ten plants identified for pilot studies of pollution prevention in this 1991 study, eight were state-owned enterprises, most of which were partially privatized in the ensuing decade (ibid.: 122–4). USAID’s Environmental Pollution Prevention Project (EP3), which ran from 1993 to 1998, hired Egyptian environmental consultants to conduct free pollution prevention assessments at these firms as well as others (Gallup and Marcotte, 2004: 219). These assessments identified no-cost and low-cost measures for firms, on the assumption that such measures were affordable. For instance, these firms could adopt simple housekeeping measures to reduce the volume of inputs used and thus the volumes of pollution generated.⁹

Pollution prevention was premised, however, on the assumption that firms operate in a market context, where reduced consumption of inputs, quality of production, and reduction of pollutants matter for firm profitability. But for state-owned enterprises, such small financial savings were unimportant in the face of large debts, soft budget constraints, and the uncertainty of privatization. Firms had little reason to change routine practices or invest in incremental managerial and technological innovations to lower consumption or produce more efficiently with fewer resources.

These problems with applying pollution prevention approaches to state-owned and quasi-privatized enterprises were in many ways predictable. During the 1980s, a team of Egyptian and American consultants conducted six environmental audits of highly polluting SOEs for USAID. These audits found that firms did not track pollution discharges nor did they monitor volumes of inputs, as these costs were not reflected in the state’s assessments of enterprise performance or in allocations of budgetary resources to enterprises. By 2004, a cumulative review of USAID’s experience promoting pollution prevention across several developing countries included a critique of focusing aid efforts on the most polluting firms without attention to firm ownership or management. As the report noted:

State-owned enterprises and the costs of pollution abatement

While many SOE managers I interviewed in Alexandria expressed concern about pollution impacts, they also felt that the government and donors should finance any improvements. As one manager at a state-owned chemical firm declared, “The state should help us or all this stuff about environment is kalam fadi [empty words].”¹⁰ An official at the Metallurgical Holding Company agreed, observing, “The private sector can help themselves. We must help the public sector in order to make it possible for them to comply with pollution laws.”¹¹

These assertions were widely accepted by managerial networks of experts and international donors. Donor funds established for pollution abatement in “hotspots” primarily targeted SOEs. From 1996 to 2008, the German technical assistance agency KfW provided grants and technical assistance under its “Environmental Facility for Public-Sector Industries” program. The World Bank and Finnish government funded the Egyptian Pollution Abatement Project from 1998 to 2005, which financed twenty-five pollution abatement projects at twenty-one facilities (Ministry of State for Environmental Affairs, 2007; World Bank, 2005b). Between 1999 and 2004, a total of eleven funds financed by international donors and managed by domestic commercial banks offered soft loans and grants for pollution control and abatement.

Concessionary lending expanded dramatically under the World Bank’s second Egyptian Pollution Abatement Project (EPAP II), approved in 2006, which established a US$20 million loan fund (World Bank, 2005b). EPAP II leveraged an additional US$145 million from the Japan Bank for International Cooperation, the European Investment Bank, Agence Française de Developement, and the Government of Finland. These funds were deposited with the state-owned National Bank of Egypt, to be distributed to selected firms on the terms of 20 percent grant and 80 percent loan (ibid.).

This financing was further paired with an additional US$7 million from the Global Environmental Facility for pollution abatement at “hotspots” in Alexandria, Lake Maryut, and Cairo (ibid.). As shown in Table 3.3 at the end of this chapter, of the fifteen companies listed as candidates for receiving funds under EPAP II, four were state-owned enterprises, seven were partially privatized state-owned enterprises, and the remaining four were private firms. In 2007, under the EU’s European Neighbourhood Policy, the EU committed to a US$558 million aid package, which included an energy and environment component, and Egypt was declared eligible to borrow additional funds from the European Investment Bank. This influx of assistance continued to prioritize state-owned and quasi-privatized enterprises in hotspots.

The assumption that state-owned firms could not afford pollution abatement encouraged managerial networks of donors and experts to privilege large, polluting state-owned enterprises for pollution abatement funds. Yet surveys of firms in Egypt did not bear out key elements of this assumption. In the previously cited survey of fifty-five large firms in Alexandria, a large proportion of which were state or military-owned, only fifteen managers interviewed (27.3 percent of the sample) thought that achieving compliance with environmental standards was too costly for their firm (El-Zayat et al., 2006). Of these fifteen, six reported that their firm had already received outside financial assistance, though none of the six managers considered this assistance “sufficient” (ibid.: 212). The other forty-three firms surveyed had not received financial assistance, yet most did not rank cost as a primary obstacle to environmental compliance.

For large state-owned firms that successfully installed basic water treatment plants and rerouted their discharges away from the Nile River, these costs were typically covered by central government allocations combined with self-financing (Egyptian Environmental Affairs Agency, 2002). How did such companies manage to “self-finance” pollution abatement costs, when most firms were chronically indebted, saddled with excess labor and inefficient and outdated production lines, and producing poor quality products?

Inside the soft budget constraint

The answer lies in a host of opaque, intra-public sector financial transactions between enterprises, public-sector banks, and government agencies. Two major sources of investment for SOEs were Egypt’s National Investment Bank (NIB) and the Public Savings Fund (PSF), which allocated money to central ministries which, in turn, divided it among holding companies, and then among affiliated state-owned enterprises. Neither the NIB nor the PSF publicized their balance sheets, and nor were these institutions subject to parliamentary scrutiny. State-owned enterprises could draw on off-budget sources of “deficit” financing, provided by other state-owned entities, as well as the NIB and the PSF, in order to fund pollution abatement.

The Extracted Oils and Derivatives Company, for instance, with LE400 million in annual turnover, claimed to have unpaid debts amounting to LE900 million from the Ministry of Supply in 1997 and to be operating at a loss. The company, however, self-financed LE7.5 million in pollution controls by drawing on overdraft credits from the NIB (Soil and Water Ltd, 1998: 11). These loans were, in turn, credited to a state-owned military factory that supplied industrial wastewater treatment projects for two of the firm’s plants in Alexandria. Thus, when SOEs invested in pollution control, the equipment was supplied largely by other state-owned agencies and financed by intra-public sector transactions. In this context, firms had little incentive to pursue pollution control strategies based on clean production or pollution prevention.

Most managers at large SOEs were far more concerned with what they termed industrial modernization. Managers sought aid from donors, holding companies, and the central ministries for comprehensive upgrading of production lines through donor and governmental transfers. In surveys, managers ranked improved product quality, increased production, and cost reduction as their primary concerns, not pollution control (El-Zayat et al., 2006). They argued that international donors should focus on industrial modernization, to replace and update production processes entirely, and thereby improve product quality and competitiveness in contexts where privatization and competition were increasing.

Managerial concern with the need for comprehensive industrial modernization became more acute as Egypt liberalized access to its domestic market. Beginning in the late 1990s, Egypt signed a number of multilateral and bilateral trade agreements that opened domestic industry to global pressure. These included Egypt’s accession to the World Trade Organization (WTO), bilateral trade agreements giving preferential access to the US market (such as the establishment of Qualified Industrial Zones, which include minimum content requirements from Israel), and the EU–gypt Association Agreement, which came into effect in 2004. All of these agreements provided for lower tariff barriers in key industrial and service sectors, opening up protected markets to competition with multinational and domestic private firms. State-owned and quasi-privatized enterprises thus bargained to “soften” environmental legal constraints, in a similar manner to softened budget constraints.

Rakta Pulp and Paper

The case of the Rakta Pulp and Paper Company in Alexandria illustrates the mismatch between expert framings of pollution control as critical “hotspots” in need of immediate, low-cost interventions to reduce pollution, and the incentives for managers at a quasi-privatized enterprise to bargain with the government and with donors for more comprehensive and costly packages of external assistance.

Founded in 1958, Rakta Pulp and Paper was nationalized in 1961 and partially privatized in the late 1990s. The firm owns eight plants producing paper products out of rice straw, with some sugarcane bagasse and scrap paper inputs as well. Rakta’s paper is largely sold to other state-owned enterprises and government-owned presses.¹² Rakta has long been identified as an Alexandrian pollution hotspot, since its production process consumes a great deal of water and wastewater discharges contain high concentrations of total dissolved solids. Pulp and paper production at Rakta consumes between 81,500 and 137,200 cubic meters of water per day (El-Bestawy et al., 2008: 1521). Pulp and paper plants accounted for the largest water pollution loads in the Alexandrian metropolitan area, estimated at 35 percent of total waste loads (Hamza, 1991: 103).

Rakta’s water pollution has been a focus for managerial networks for decades. When I visited the plant in the late 1990s, the production manager showed me dozens of donor-funded studies, conducted over years, on how to address the company’s pollution problems. Privatization and a rise in international paper prices had brought a flood of cash into the company. Yet, as the manager explained, upper management in the firm and the affiliated holding company had not acted on these reams of recommendations. The firm was instead waiting to hear about an industrial modernization package from the World Bank’s Pollution Abatement Fund.¹³

In part, difficulties in addressing pollution stemmed from adapting technology to local inputs. In an interview, the production manager observed that:

Rakta’s production processes using rice straw discharge large quantities of “black liquor” effluent that have proven difficult to treat before discharge. Egyptian researchers, however, have increasingly identified several cost-effective techniques for doing so (El-Ashtoukhy et al., 2009; El-Bestawy et al., 2008). Yet untreated “black liquor” discharge largely persists (ibid.).

Rakta’s decision to wait for external assistance characterized the approach of many partially privatized enterprises toward pollution control and environmental management. As much as pollution was a liability for the general public, it thus served as a peculiar kind of asset in terms of intra-bureaucratic bargaining and qualifying for external assistance.

Constraints on legal and infrastructural authority for pollution control

Large industrial firms could take a leisurely approach to pollution control in large part because of “soft enforcement,” the lack of infrastructural and legal authority to compel firms to prioritize pollution control. The difficulties of inducing state-owned and quasi-privatized firms to embark on pollution prevention and clean production measures reflected the absence of credible enforcement mechanisms and limited legal authority. As discussed in Chapter 2, the 1994 environmental law (Law 4/1994, revised as Law 9/2009) conferred limited authority for pollution control upon the Egyptian Environmental Affairs Agency (EEAA). Instead, legal authority for pollution control remained vested in the “administrative authority” with oversight over a given enterprise or responsible for allocating land to the firm.¹⁵ Administrative entities vested with enforcement authority thus included municipalities, urban districts, the provincial governments (governorates), special investment authorities, the Ministry of Industry, or various agencies affiliated with the military.¹⁶ Law 4/1994 did provide the Minister of State for Environmental Affairs with some authority to intercede directly with these administrative agencies. Specifically, the minister was empowered to request provincial governors to close polluting factories temporarily or to shut off water and electricity supply to a violating plant.

Such extreme actions, however, were obviously reserved only for exceptional cases. More typically, pollution control networks sought to coordinate with other administrative authorities by creating inter-ministerial protocols and joint committees. A 1998 draft protocol between the EEAA and the Federation of Egyptian Industries specified that a joint committee would serve “as a means for exchanging viewpoints and consultations on the problems of factories…and for reaching compromises between factories, EEAA, and the [state-organized] Federation of Egyptian Industries” (Egyptian Environmental Affairs Agency, 1998: 3). Another protocol signed with the Ministry of Labor stipulated that the EEAA would provide additional training for 150 occupational health and safety inspectors in order to combine environmental inspections with existing occupational health and safety inspections (Egyptian Environmental Affairs Agency, 1998).

The executive regulations for Law 4, issued in 1995, provided industrial establishments with an automatic three-year grace period to comply. A survey of 1,000 facilities undertaken in 1997 by Egyptian pollution control experts found that only a small percentage of new facilities complied with the standards of the law (Sharif, 1999: 3). Over half reported that they had taken no action, 25 percent reported they had taken some measures, and only 5 percent reported that they complied. Yet—as in surveys conducted a decade later— only 10 percent reported that lack of technical assistance and financing were insurmountable obstacles to achieving compliance with environmental standards (ibid.). Of fifty-three public and private firms that submitted data to the USAID-funded Environmental Pollution Prevention Project (EP3) between 1994 and 1997, only 17 percent of firms surveyed said they knew about the requirements of Law 4, none had taken additional measures to comply with the law, and only 11.3 percent had pursued water treatment options other than simple dilution.¹⁷

A senior consultant to the environment minister observed that, at the end of the grace period, the agency still lacked any credible infrastructural authority through which to reach polluting firms:

Faced with these organizational deficiencies, the then-environmental minister, Nadya Makram Ebeid, launched a campaign in 1998 targeting thirty-four large, state-owned “hotspots” that discharged effluent directly into the Nile, all concentrated around Greater Cairo. The campaign was conducted by the newly established Industrial Compliance Office within the environmental agency, staffed by a handful of pollution experts. Most were hired directly as consultants by the Minister of State for Environmental Affairs or by the CEO of the environmental agency.

Without reliable means for the agency to gather ongoing information on pollution loads, the minister authorized surprise inspections (Ebeid and Hamza, 2001). The Minister of State for Environmental Affairs also publicly announced that she would request the relevant administrative authority to shut down egregiously polluting plants, shutting off electricity and water to the plants if they did not comply. These threats and surprise inspections received extensive coverage in the state-owned media, heightening pressure on otherwise largely unaccountable enterprises. Faced with intensified media coverage, spot inspections, and fines, environmental experts reported that ten state-owned enterprises spent slightly over LE320 million during 1998 on water treatment and recovery systems (ibid.). The environmental agency reported that another twenty-one companies stopped dumping effluent down drains that emptied directly into freshwater resources by 2002, at a cost of LE120 million.

Many of these firms, however, simply redirected their wastewater discharges from the Nile River into urban sanitation networks. The Cairo and Alexandria sanitation utilities, established under donor auspices as quasi-autonomous cost recovery organizations, became increasingly concerned about the effects of industrial effluent on the longevity and effectiveness of their infrastructure and treatment capacities. Under pressure from donors, the Cairo and Alexandria sanitation agencies were granted executive authority to autonomously raise fees and impose fines. They used this authority to increasingly impose fines on industries discharging untreated effluent into their networks.

The Cairo Sanitary Drainage Organization, for instance, levied a LE1.1 million surcharge on the Egyptian Starch and Glucose Firm (ESG) in Cairo, prompting plant managers to quickly install an on-site treatment facility in order to get the surcharge waived (ibid.). The contrast between Rakta’s delays in addressing its discharges of “black liquor” and ESG’s attempt to quickly treat wastewater discharges in-house highlight why environmental networks emphasized the importance of creating institutions with adequate legal authority. The Cairo and Alexandria drainage authorities, endowed with the legal authority and infrastructural capacity to impose fines, had some success in forcing companies to install basic wastewater treatment plants.

Compliance action plans

Given the limits of the environmental agency’s legal authority, managerial networks attempted to provide positive inducements for more firms to begin to collect basic information about pollution loads and to begin to address their pollution problems. The challenge for managerial networks was how to create linkages with polluting firms, that is, to build infrastructural authority. Expert consultants at the Industrial Compliance Office decided to offer all firms, not just those in “hotspots,” an additional two-year grace period to comply with Law 4 if they would submit “compliance action plans.” These plans were to set out how firms would monitor their pollution loads and a timeframe for pollution abatement.

Managerial networks publicized this initiative through their public roles as staff at the environmental agency and their private roles in private consulting firms. According to the project manager for the World Bank’s Egyptian Pollution Abatement Project (EPAP), the most effective means of reaching enterprises was that private environmental consulting firms began soliciting enterprises directly, by offering to prepare the compliance action plan for a fee.¹⁹ For companies, preparing such a plan was attractive even in the absence of credible enforcement mechanisms, since managers saw the plan as signaling their intent to comply with formal regulations and gain the environmental agency’s stamp of approval to delay compliance for several more years. The Industrial Compliance Office reported that, within several months, they had received 190 submissions from enterprises by late 1997 (ibid.). Private environmental consulting firms had prepared most of the action plans.

The limits of the EEAA’s legal authority to undertake even these kinds of initiatives soon became clear, however. The prime minister announced that extending the grace period would reflect poorly on the government’s commitment to environmental enforcement and refused to authorize the promised extension of time. This stance was ironic, as the same Cabinet had taken no real steps to pressure governmental ministries to comply. Environmental experts in pollution control networks faced a dilemma: they could not legally accept (or reject) the already-submitted compliance action plans, but publicly admitting this fact would stop firms from submitting such plans. They opted to continue accepting firm submissions, and notified companies that their submissions had been received without extending a formal grace period.

Despite this legal limbo, some firms continued to hire consulting firms to prepare compliance action plans, since environmental consultants working with donor projects used the plans in putting together projects for external assistance. In addition, some donors, such as USAID, sought to create more demand for private environmental consulting firms. Preparing a compliance action plan thus became a prerequisite for gaining access to environmental aid. In contrast to the original purpose envisioned by managerial networks, the compliance action plan was thus increasingly decoupled from regulatory enforcement.

Conclusion

Environmentalism in Egypt includes widespread public concern about the effects of industrial pollution on health and local environments. Increasing attention to pollution from international donors helped spur the growth of managerial networks focused on pollution control. The expansion of external concessionary financing spurred demands for environmental goods and services supplied by private environmental consulting firms. Through iterative projects undertaken by donors and state agencies, network participants rotated through multiple roles in private consulting firms, government ministries, academia, and donor projects.

Despite efforts to build authority, however, these networks were unable to implement credible sanctions or supply sufficient inducements to promote rapid, substantive change in firm environmental performance. Managerial networks promoted pollution prevention and clean production as cost-effective approaches to pollution control, and advocated focusing on critical pollution “hotspots.” In emphasizing critical hotspots, managerial networks helped focus regulatory efforts and financial assistance on a limited number of large-scale, state-owned, and quasi-privatized firms. Since these large clusters of polluting firms were numerically limited, such an approach would seem to facilitate building linkages to regulated industries.

These discourses about pollution control, however, presupposed that managers considered cost savings on inputs and faced constraints on discharging pollutants. For state-owned and quasi-privatized enterprises operating under a soft budget constraint, these conditions only partially applied. Indeed, in the context of Egypt’s transitional economy, highly polluting firms used their pollution loads as an “asset” in implicit bargaining within the state apparatus and with donors for more comprehensive aid packages, folding pollution control into larger negotiations about comprehensive industrial modernization of production lines. In this context, pollution became an asset for large enterprises rather than a liability. The greater a firm’s contribution to pollution levels in critical “hotspots,” the more privileged its claim to external funds and the better its prospects for delaying action on pollution control. Managerial networks, whose main participants were often based in private consultancies, could not muster sufficient legal, discursive, or infrastructural authority to induce firms to engage in significant, timely pollution control efforts.

In addition, Egypt’s implementation of market reforms and privatization through executive decrees offered few opportunities for environmental experts to shape policy. Unlike in some of the Eastern European cases, privatization transactions were not conditioned on environmental improvements, and no systematic approach to enforcement (such as progressive fines based on pollutant loads) was adopted. Instead, executive authority for pollution control remained fragmented among a variety of ministries, provincial governments, and holding companies, often tied to the specific agency granting permission for industrial land use.

Existing regulatory efforts remain insufficient to address pollution issues, whether in “hotspots” such as Alexandria’s Lake Maryut or outside them. The result has been mounting protest in urban and rural areas already affected or potentially impacted by industrial pollution. The next chapter thus analyzes the emergence of popular campaigns led by activist networks around pollution issues in several provincial Egyptian cities.