(Corrects first paragraph of fourth section to show Mursi
appointed Sisi as defence minister)
* UAE backs Egypt military as bulwark against Brotherhoood
* Gulf state backs strategic wheat project
* Ministry, army deny project has had problems
* UAE says relationship is and always will be strong
By Maggie Fick
CAIRO, March 27 Egypt's army is taking charge of
billions of dollars of development aid from the United Arab
Emirates, an army official said, raising further doubts over the
narrow separation of powers with the military backed
administration in place since July.
One of several Gulf states to shower Egypt with cash and
petroleum products after the army ousted elected Muslim
Brotherhood president Mohammed Mursi, the UAE also looked ahead,
seeking to bolster a system that could keep Islamists it sees as
an existential threat from running the most populous Arab state.
Alongside money to build clinics, schools and housing units,
it offered to fund a project in Egypt's strategic wheat
sector--the construction of 25 wheat silos that could help the
world's biggest importer of the commodity lower its huge food
Bread is a politically-explosive issue in Egypt -- failure
to deliver it at an affordable price has triggered major riots
in the past and the government wants to boost its storage
capacity to reduce its reliance on international markets.
When army chief Field Marshal Abdel Fattah al-Sisi toppled
Mursi after large demonstrations against what protesters said
was inept government, he put in place an interim civilian
cabinet meant to be at arm's length from the military.
But Major General Taher Abdullah, who heads the Engineering
Authority of the Armed Forces, said when UAE officials discussed
projects shortly after Mursi's ouster, it was with the army.
"They said, 'we will support the Egyptian people but through
the army -- if the people want a hospital, the armed forces will
build it,'" the 58-year-old career officer and engineer told
Reuters in an interview.
The army's role in building construction became public
earlier this month when UAE government-linked Dubai firm
Arabtec's announced it had inked a $40 billion deal with the
military to build one million homes in Egypt.
In the silos project, it has been acting behind the scenes.
The army was not mentioned when a $4.9 billion UAE aid
package for development and infrastructure schemes was announced
in October. It included funds for the new silos, which the
government says should help prevent the loss of 1.6 million
tonnes - around half a billion dollars worth - of wheat a year.
An official at Egypt's state-run silos and storage company
with knowledge of the wheat project told Reuters the interim
government's Investment Ministry launched a tender in January to
choose a company to build four of the silos.
The estimated per-silo construction cost in the tender
specifications was nearly three times the cost projected by the
UAE, according to the silos company source.
The UAE told the Egyptian ministry to withdraw the tender,
making clear that they would not release money until they saw
more "suitable" prices in it, the source said.
He said the UAE held a meeting at a Cairo hotel in early
March, convening representatives from the three Egyptian
ministries and the state silo company along with army officials.
A trader with knowledge of the Egyptian wheat sector also
said the UAE had rejected the January tender.
Sherif Oteifa, an adviser to the Investment Minister on
"mega projects", confirmed a tender was issued in January but
said it had not been rejected. He said he hoped next week to
have final clearance from the Emirates government to award
contracts for construction of two of the silos. Officials
estimate they will take about 18 months to build.
Oteifa said the army had monitored the tendering process on
a weekly basis. "We are happy with this, it makes the process go
quicker. But the army will not be involved in construction: the
bidders are public and private companies."
The UAE's Egypt aid point man said recently Abu Dhabi had
excellent cooperation with the interim government, which was
reshuffled unexpectedly last month.
GETTING THINGS DONE
The silos company source said the tender would be run again,
along with tenders for the remaining silos. "We agreed that
revisions will be made to the tender, and a deadline was set ...
for the opening of bids again," the source said.
The trader said he did not have an update on the timing,
adding: "They are looking to reorganise the tender and re do it.
The Turkish silos are very cheap, they will probably buy those."
Asked why the army attended the meeting, the silos company
source said: "The UAE wants to make sure the money goes to the
right place...and thinks the army is the best way to guarantee
Major General Abdullah said meetings between officials from
the two governments over the silos were happening on a weekly
basis and that army officials attended them.
He dismissed the account of Emirati frustration with the
tender process. He did not give details of the latest timetable,
but expressed optimism about progress, citing the army's
approach to getting things done:
"When we say a project will be done in six months, then,
with the will of God and the support of God, in six months it
will be done."
Egyptian governments now know that unlike in the past,
performance is critical. Massive street protests have removed
two presidents in three years.
The interim government's decision to resign in February,
with many but not all the same faces reappointed shortly
afterwards, has not been fully explained: some analysts see it
as a way for the army to distance itself from some of the
economic problems that have persisted since Mursi's ouster.
Sisi, 59, who was appointed defence minister by Mursi and
held onto to the post after he ousted Mursi in July, resigned as
both army chief and defence minister on Wednesday so he could
run for president in an election that is part of a roadmap to
return Egypt to civilian rule. He is expected to win easily.
Thousands of Islamist supporters of Mursi have been jailed,
hundreds killed and the movement is back underground, where it
was before former air force chief and longtime Egyptian ruler
Hosni Mubarak was toppled in a popular uprising in 2011.
Under Mubarak, the military gained control of a vast
business empire ranging from bottled water companies to petrol
Government spokesman Hani Saleh told Reuters it was logical
for it to be involved in the wheat silos project.
"The army is an integral part of this country and is known
for its integrity, discipline and past experience in conducting
major national projects, especially of this size," he said.
The Supplies Minister was not reappointed in the new
cabinet. The turnover happened just days after he had sacked
several government officials involved in the wheat sector,
including the head of the silos and storage company.
Shadi Hamid, fellow at the Brookings Institution's Saban
Center in Washington noted a contrast between the pace of work
by the Egyptian government and that in Gulf nations such as the
UAE, the most modernised Arab economy.
"There's a frustration there because the Egyptian government
cannot get basic things done," he said.
"It's not something that the Emiratis or Saudis are used to;
for them, when they want results they can actually take specific
measures to get those results."
Emirati officials say publicly that they are supporting
Egypt's "march of progress".
"There was excellent cooperation and commendable efforts on
their side," UAE minister of state Sultan Ahmed Al Jaber said,
when asked in a newspaper interview for his assessment of ties
between the UAE and the government of interim Prime Minister
Hazem el-Beblawi that was in place until last month.
"The Egyptian-Emirati relationship is and will always be
strong, and it's of a strategic nature," said Jaber, according
to a transcript of the interview published on March 17. The
interview also appeared on the UAE's official WAM news agency.
Jaber is the UAE's point man on the Egyptian aid projects.
Despite the difficulties of doing business in Egypt, there
are no signs that the UAE, or Saudi Arabia or Kuwait, will
withdraw their support for a pivotal country in the Arab world.
"Even though the Emiratis are frustrated, they've signed on
for the long term (and) they are on board ideologically," said
Justin Dargin, a Middle East energy expert at the University of
It is clear who they see as their partner. When Arabtec
announced the housing construction deal, Egyptian papers
splashed front page pictures of one of its executives, shaking
hands with Sisi.
(Additional reporting by Shadia Nasralla in Cairo and Sarah
McFarlane in London; editing by Michael Georgy and Philippa