The army’s dominance is catastrophic for Egypt

August 23, 2019

It’s no secret for any Egyptian that the generals are dominating all aspects of life – politics, economics, the press, academia, health and even sports. The Egyptian regime appoints the majority of directors across institutions without considering their administrative abilities. It seems that the Egyptian military regime headed by al-Sisi gives administrative positions to members of the military as bribery to ensure their loyalty whilst official and semi-official institutions are destroyed by maladministration. 

Under the suppression of freedom of expression in Egypt currently, there were raised voices at one of the semi-formal institutions. Workers at the Omar Effendi company expelled General Ayman Salem, the CEO. Omar Effendi is a profit-making company which turned into an Egyptian shareholding company in 1967. The trade holding company, to which Omar Effendi was affiliated, no longer exists, and its companies were distributed between the National Company for Construction and Development and the Holding Company for Tourism. 

Because of Salem’s maladministration there are about 2,100 workers in the company who have lived through crises for years because of the non-payment of allowances and late profit rewards from 2017. The workers submitted many complaints to the concerned authorities to resolve their problems but nothing has changed.

The general’s invasion

The selection of General Ayman Salem to manage a historic national company just because he was a former general is not something new in al-Sisi’s Egypt. Military domination has begun over the health sector too after the 2016 baby formula crisis. CNN reported that the Egyptian army imported about 30 million packages allegedly selling it on the market at lower prices. 

As for the ministries, they are under tight military grip. The ministries are directly ruled and administrated by retired and serving military officers. The current minister of health, Hala Zayed, announced on December 22, 2018 that the managers of pilot hospitals (48 ideal hospitals including 29 affiliated to the ministry of health and the other 19 affiliated to the higher education ministry) will be military officers. Khaled Megahed, spokesperson for the Health Ministry, released an official statement on December 22, 2018 saying, “The minister of health gave her orders to select the directors of hospitals based on their military background, with an advert in newspapers to ensure transparency.”

The economic penetration of the army

The Egyptian army has penetrated several economic sectors and has become a stiff competitor to the civil sector. It possesses more than 80 per cent of state land and depends on mandatory recruits as essential workers in all the profit-making sectors. However, the president in December 2016 said: “The Egyptian army doesn’t control half of the economy as some have claimed, the army’s activities don’t exceed 2 per cent.” He added: “I wish that the armed forces owned 50 per cent of Egypt’s economy.”

In 2012 The Supreme Council of the Armed Forces held a press conference in which then Assistant Minister of Defence for Financial Affairs Major General Mahmoud Nasr revealed that the annual profits of the army is $198 million and it’s percentage of the government budget is 4.2 per cent. At that time Nasr didn’t provide any evidence for these figures. Rashid Mohamed Rashid – the former minister of Industry and Trade under ousted President Hosni Mubarak – said that the army controls 10 per cent of the Egyptian economy in a previous interview with The New York Times. 

After July 2013 the Egyptian army expanded its economic role due to the support of Gulf countries. According to a study prepared by Carnegie Endowment in November 2014, the army was able to enter new economic sectors and was also able to take over major economic projects which required significant capital. According to the centre’s estimate the interim government chaired by Hazem el-Beblawi allocated projects valued at $770 million to the army, its institutions and its affiliated companies within 10 months after ousting Mohamed Morsi.

Army investments in cooperation with foreigners 

In December 2015 the president took the first official decision related to the army’s land and real estates. This decision kept army land even after it was evacuated to be used in its projects in cooperation with foreigners. Such decisions gave the Armed Forces Lands’ Projects Authority the right to establish profit-making businesses for the first time. 

Decision no. 446/ 2015 said: “The Armed Forces Lands’ Projects Authority shall prepare alternative cities and military zones instead of the evacuated zones, and provide all the services and activities that could achieve the authority’s objects and develop its resources, in this case it has the right to establish all kinds of companies either alone or in cooperation with national or international capital.”

This provided the opportunity to the army to initiate a $150 million fish farming company entitled “The International Company for Sea Products” in cooperation with Saudi investor Sheikh Mohamed Amer el-Gary and a German company specialised in tuna farming.

Sometimes the Armed Forces Lands’ Projects Authority sell for the highest bidder in a public auction. On 2 December 2015 the Authority announced  an auction for housing and commercial units and garages.  These projects were in Greater Cairo in “Zahraa Nasr City, Al Hay Al Asher, Safwah Al Methaq Towers, El-Nozha, Al Jabal Al Akhdar in front of Nadi Assekkah Al Hadid, Al-Helmiya and along Rabaa Al Adawiah Sq.”  The auction extended to projects in Alexandria in Mostafa Kamel Investment Area on Al Kornish Road.” The auction stipulated 35 per cent payment of the unit’s price in advance and to pay in instalments 65 per cent over three years in semi-annual instalments with an interest rate of seven per cent.

The new administrative capital: army property 

The president has issued decision no. 57/ 2016 by which 16,645 acres of land on the the Cairo-Suez road has been allocated to the army, the New Administrative Capital and the Urban Zayed Settlement, which are expected to be finished within five to seven years. These constructions aim to get away from congestion and pollution in Cairo. The New Capital is expected to cost $300 billion. 

The decision was taken after the Emirati businessman Mohamed el-Abbar, CEO of Emaar Properties, decided to withdraw his plans to construct a new administrative capital in Egypt as he said that he couldn’t achieve to a satisfactory agreement with both parties.

It seems that there is a desire within the armed forces to take possession of land and real estate through its affiliated companies. The untold story in journalism is that the New Administrative Capital is considered private property of the armed forces due to a presidential decision. 

To highlight the economy controlled by the army we can look for the affiliated companies of the National Service Products Organisation which is affiliated to the armed forces. The National Service Products Organisation was established under resolution no. 32/ 1979 after signing the Camp David Accords with Israel. The organisation aimed to achieve self-sufficiency of essential needs of the armed forces to ease the burden on the state with providing surplus production to the local market, and contributing to national economic development projects.

According to its official website the mission of the organisation is to improve national products in cooperation with civil institutions with a special focus on infrastructure projects, especially in border governorates such as North and South Sinai and The New Valley. 

Among the most important companies owned by the army are el-Nasr Co. For Services & Maintenance, Macaroni Queen Company, Egg Production Compound, National Company For Food Industries, National Co. for producing natural water (Safi), Wadi el-Sheikh Agricultural Farm, Upper Egypt for Agricultural Manufacturing and Land Reclamation, National Company of Desert lands Reclamation and Cultivation, National Company of Refrigeration and Supplies, National Oil Company, large numbers of fish farming companies, el-Arish Cement Factory, Arab International Optronics, Plastic Factory, National Batteries Company, several construction companies, Watanya Company For Roads and Egyptian Black Sand Company.

The army’s economy is promoted also by the Public Administration for Military Products which owns more than 18 factories including pharmaceutical factories. In August the administration signed a protocol of cooperation with the Egyptian Company of Agricultural and Rural Development. This protocol aims at the mutual cooperation of both parties in manufacturing, supply and marketing different farming equipment needed by peasants like grain dryers, tractors, generators,  water pressure units to organise drip and pivotal irrigation, rotary ploughs, pivotal irrigation systems, pesticide sprayers, homemade tools and products, fire-fighting means and gas cylinders. In addition to that they cooperate in construction, contracting and engineering consultancy, and marketing the products and equipment of the Egyptian Company of Agricultural and Rural Development through branches and outlets.

Transport Minister, Lieutenant General Kamel el-Wazeer, stated that the president tasked him with conducting a study of the establishment of a new iron and steel factory or to enter into a partnership with investors.

It is noteworthy that all the army’s factories and companies have full tax and customs exemption. Besides the major percentage of the workers in the economic projects belonging to the army, mandatory recruits come from the Egyptian army. The budget of The Egyptian Armed Forces is considered an inaccessible, military secret.