Boycotting the army’s companies: Could the Egyptian economy be liberalised?

Amidst the army’s growing investments and control over all aspects of the civilian economy in Egypt, a campaign spread on Twitter and social media platforms, calling for a boycott of the armed forces’ products.

The campaign “Boycott Sisi’s military products” ignited widespread interaction and controversy among tweeters. Some of them explained the army’s control and monopoly over many economic activities and that this money does not enter the state treasury. Others published pictures of the National Service’s products (an economic organ of the army), which are sold in the streets and squares by soldiers. They criticised the waste of the army’s role and its primary mission in protecting the borders and confronting enemies in favour of commercial activities. In contrast, some participants explained the difficulty of boycotting the army’s commercial companies because of their low prices, especially since these companies do not pay taxes, electricity, rental fees, or workers’ wages, as they put it.

Economists say the crisis is not just about competing with military companies in all fields, but the crisis is that it is unfair competition and is not subject to free market rules.

Army’s companies

It is common in Egyptian neighbourhoods and cities to see National Service vehicles of the Armed Forces selling frozen meat and food commodities at lower prices than in the shops. Citizens queue around cars to buy products and pay money to conscripts who act as salesmen. In contrast, the recruit who performs his mandatory military service period does not get paid for his work.

The Armed Forces National Service Projects Organisation was established during the era of the late President Anwar Sadat, to ensure self-sufficiency for the armed forces. After starting offering surplus production in the local market and aid in the state’s economic development projects, such as infrastructure projects and development projects in border governorates, the economic role of the Egyptian armed forces has expanded in size. It has shifted qualitatively since the ouster of President Mohamed Morsi in 2013 through a military coup. Since the rise of General al-Sisi, the army’s economic empire has increased, and it is now engaged in trading baby milk, medicine, and transportation.

Army companies have grown to 2,300 projects in which 5 million civil employees work, in the field of heavy and specialised industries, the agricultural sectors, fish farms, quarries, and mines, contracting, infrastructure and other mega projects in the country, according to the military spokesman for the armed forces, Colonel Tamer al-Rifai.

Unfair competition

Activists drew attention to many economic activities that the army has stormed and competed with private sector companies, such as pharmacies, mineral water production, gas stations, cement, petroleum production, pasta and olive oil. The photos of al-Sisi opening the Armed Forces Engineering Authority projects, one of the branches of the army that he assigned to oversee the new Suez Canal bypass and the construction of hundreds of housing units for low-income people, have become regular features.

Passengers on the main roads now pay fees at the gates that are the trademark of the National Service of the Armed Forces, which is the army agency that is tasked with repairing and developing roads. Meanwhile, Le Monde French daily reported that the army’s control of the Egyptian economy has caused an imbalance. The newspaper said that since Abdel Fattah al-Sisi took power, the presence of retired officers at the head of public companies and the possession of about 94 per cent of the state’s land has caused an imbalance in the economy and brought business people out of their silence.

Out of monitoring

In 2018, the government issued Contract Law No. 182 of 2018, which allows the army and military companies to be exempt from oversight and accountability. It stipulates that the implementation of contracts, without entering into public bidding, with the aim of “protecting national security,” allows these parties absolute secrecy in sales, purchase or profit deals, which leads to a lack of transparency and lack of competition with the private sector.

During a television interview in 2012, Counselor Hisham Geneina, head of the Central Auditing Organisation at that time, said that he was unable to monitor the commercial installations of the armed forces that had nothing to do with national security and that did not require strict secrecy. He explained that a prominent example of this is the fact that the armed forces rent halls for civilian activities, such as weddings and birthdays, in exchange for sums of money without any supervision. Geneina said, “It is not acceptable that the Central Auditing Organisation cannot monitor the armed forces’ wedding halls,” asking, “What is the relationship of the armed forces wedding halls to national security?”

For its part, the International Monetary Fund warned in September 2017 that private sector development and job creation “may be hindered by the participation of entities under the Ministry of Defence.”