An Egyptian multimillionaire and key national business figure, Rami Lakah, is reported to have fled the country, leaving behind some LE 1.5 billion in bank loans.
The leftist Al Ahli newspaper reported that Lakah fled to Paris because he was unable to pay his debts. The scandal is just the latest in a run of similar cases that have sent shockwaves through Egypt's business community and highlighted weaknesses in the country's banking sector and its less-than-rigorous loan policies.
Informed sources in Cairo say Lakah earlier this year asked the government to cancel half of his total debt and reschedule payment on the other half, but was turned down. He also was said to have sold one of Lakah Group's holdings, Midwest Aviation, to Royal Jordanian Airlines.
The Lakah Investment Group, founded in 1995, is one of the giants of the Egyptian economy, with a total capitalization of LE 1.149 billion. The group owns ten companies, six engaged in health services and equipment, with other interests in industry and construction. The group's profits for 1999 were LE 93.3 million.
Lakah was one of Egypt's top ten businessmen and his flight - if it is confirmed as such - could have ramifications not only on the banking sector, but for the whole economy, and could lead to the bankruptcy of dozens of other companies.
An Egyptian economist told the Cairo Times that Lakah's woes could be traced to the multimillionaire seeking too much diversification too soon. "Lakah's entry into a number of unrelated sectors, such as aviation, iron, and others require huge amounts of capital and concentration," he said.
Lakah borrowed heavily to finance his investment projects, largely from the state-owned Bank of Cairo, where he owes an estimated LE 830 million. When liquidity dries up, payments on such loans becomes increasingly difficult.
After news broke that he had fled the country, Lakah's stock plummeted from LE 9 to LE 2. The Lakah Group's global depository certificates on the London exchange fell 80 percent in the few days after the story was published.
Lakah is not the only businessman to flee Egypt because of financial problems. In recent months, another five have 'disappeared', leaving behind heavy debts. The most recent case was that of Mustapha Al Beleidi, owner of several cosmetic factories, whose total loan debts reached LE 180 million. Mahmoud Wahba also fled the country owing LE 380 million. Other recent escapees include Adel Fahmi, who fled to London owing LE 350 million to Egyptian banks, and businessman Hatem Al Hawari.
Last week the pro-government Egyptian Mail newspaper ran a front-page story on the Lakah affair headlined "Little Thieves Hang, Great Ones Escape." But the semi-official Al Akhbar has since defended Lakah, publishing an exclusive interview with him. Lakah denied he had fled, but wouldn't say when he would return home.
He claimed that assets in his accounts at the Bank of Cairo were enough to cover his outstanding debts. –(Albawaba-MEBG)
© 2000 Mena Report (www.menareport.com )