HomeNewsEgypt's military economic empire under threat

    Egypt’s military economic empire under threat

    A handout picture released by the Egyptian Presidency on July 22, 2018, shows Egyptian President Abdel Fattah al-Sisi and defense Minister Mohamed Ahmed Zaki (R) attending the graduation ceremony of new army officers at the army academy in the capital Cairo.

    Within the vast empire that the Egyptian army has built up, two companies are expected to be opened up to private investors. The Wataniya company, which operates more than 250 gas stations, and the mineral water bottling company Safi, are among the first privatizations that the government hopes to complete. “They have been promising it for years, they are delaying and will delay again,” said a skeptical Yezid Sayigh, director of the program on civil-military relations in Arab states at the Carnegie Center in Beirut. “The main reason for this is the reluctance of the military to give up anything they consider to be a cash cow. Officers or units may have a vested interest in retaining even barely profitable businesses to use for benefits, bribes…”

    Read more Article reserved for our subscribers Egypt outlines a vast privatization plan

    The military’s appetite has grown under the presidency of Marshal Abdel Fattah Al-Sissi. The backbone of the state since 1952, the military has become the spearhead of the megaproject policy of the former military intelligence chief, brought to power by Egypt’s 2013 counter-revolution. The tradition of rewarding retired officers with prestigious government positions, state enterprises and local authorities in exchange for their loyalty has continued. The military’s influence on economic policy, budget allocation and public contracts has increased. The army has expanded its empire beyond its historical turf, from the Suez Canal to hydrocarbons, transportation and telecommunications.

    Fish farms, the pharmaceutical industry, the media… the military’s entryism has spread to new sectors, at the risk of destabilizing entire sections of the economy. The 72 companies under the supervision of the ministries of military production and defence, as well as the Arab Organization for Industrialization, operate in complete financial opacity, with no control over their accounts or performance. They pay no taxes. Conscripts are used as cheap labor. The military take over public contracts and use state land as they see fit. Banks cannot refuse them anything, nor can private entrepreneurs, who are forced to put up with the unfair competition of the military.

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    Flight of foreign investors

    “The military is a coercive actor that scares off foreign investors. This makes the economy less and less attractive in many areas,” said Timothy Kaldas, deputy director of the Tahrir Institute for Middle East Policy. According to him, the International Monetary Fund (IMF) and Egypt’s major donors, such as the United Arab Emirates and Saudi Arabia, have turned a blind eye to this phenomenon for too long. The tone has changed with the collapse of the Egyptian economy in the wake of the war in Ukraine. Reducing the state and military’s footprint in the economy is now being prioritized by the IMF, which provided a third loan to Egypt in December. Gulf sponsors are working behind the scenes to ensure that no more concessions are made in Cairo.

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