Egypt’s military tightens hold over economy under Sisi

In January this year, Egypt began importing natural gas from Israel. It marked a sharp reversal of roles: until a few years ago, it was Egypt selling gas to energy-starved Israel. 

The regime of President Abdel Fattah el Sisi faces criticism as Egypt itself sits on huge gas reserves - its Zohr gas field is the largest in the Eastern Mediterranean. So why import it? 

Cairo says it’s a deal between private companies, and that the government has nothing to do with it. That is not strictly true. Behind a layer of holding companies registered in tax havens, lies the real owner of the pipeline that brings gas from Israel’s Ashkelon region to Arish in Egypt: Egyptian General Intelligence. 

Since Sisi, a former army commander, came to power in the 2013 coup, the military has tightened its stranglehold over the economy - it sells everything from televisions, refrigerators, cement, fertilizer to chickens and eggs. 

Sisi “believes the military can generate revenue for the state and create jobs, provide affordable commodities to poorer and middle class Egyptians, which is good for him politically,” Yezid Sayigh, a senior fellow at the Carnegie Middle East Center, tells TRT World. 

‘We can deliver’ 

The Egyptian military has elbowed its way into various commercial sectors by bolstering its image as an institution that can quickly build roads, and provide relief to people when civilian bureaucrats and private businesses fail. 

For instance, the military makes a big show of distributing food to the poor during the fasting month of Ramadan and selling poultry at subsidised prices. 

Running businesses and having a share in commercial ventures is nothing new for the Egyptian military. For decades, generals have shared the economic spoils alongside politicians and business cronies. 

“The military was simply given the opportunity to build its own business interests starting in the late 1970s and especially the 1980s at a time when the state still owned most of the economy.

“In other words, the military were allowed to become another interest group in an economy dominated by privileged access and political connections, just as was allowed to public sector companies and later to private companies after the 1991 privatisation,” says Sayigh. 

But the military's economic footprint was fairly limited before 2013, a period when political cronies of the ruling elite had the lion’s share when it came to controlling real estate and factories. That seems to be changing now. 

Since Sisi came to power, the military has managed roughly one third of the budget spending, building roads and bridges, and importing food and medical supplies, Sayigh wrote in an extensive study last year. 

So how much is it?

Contrary to some exaggerated figures that suggest the armed forces control 30 percent or 60 percent of the economy, the military’s share is probably between 1.5 percent and 2 percent of the GDP, Sayigh wrote in his report. 

At $303 billion - as per World Bank figures - that brings the military's economic output to just $6 billion. However, it remains difficult to ascertain the exact size of the military's revenue and profit as its dozens of companies and ventures are not properly audited. 

Yet, a look at recent events do point to the military's intentions. 

In the last four years, the National Services Project Organisation, an arm of the defence ministry, has spent $1 billion on its El Arish cement plant, expanding its share in the domestic cement market from 3 to 23 percent. 

This has left private companies such as Germany's Heidelberg sitting on excess capacity and financial losses. 

The NSPO has also constructed a fertilizer plant. Then there’s the example of the $107 million investment in the Middle East’s largest fish farm in 2017. 

If that was not enough, the NSPO has joined three other state companies to create a marketing arm that works as sole distributor of phosphate fertilizer in Egypt and has become a major marble producer. 

Various military-controlled companies are making washing machines, televisions, cooking gas cylinders, garbage trucks, water pumps, disposable syringes. The list goes on. 

The military also plays a dominant role in the multi-billion dollar Suez Canal expansion project and the new administrative capital that Sisi wants to build near Cairo. 

The soldiers would want everyone to believe that the armed forces run the business on commercial lines. But it has managed to penetrate the market on the back of privileged access to government contracts, information and tax exemptions. 

Over the years, retired officers have come to hold key positions in different ministries. This way they have helped their comrades get contracts for new projects and expedite approval for permits. 

Despite the increasing role of the military, the International Monetary Fund has praised Sisi’s government for cutting the budget deficit through austerity measures and other reforms. 

Similarly, the United States, a key backer of the Egyptian regime, and the European  Union, have mostly avoided bringing up the role of the military in economic life. 

“Privately they don't like it, especially in European capitals, but they don't let concerns over the military economy disrupt their relationship with Egypt, which they regard as important for geo-political and commercial reasons,” says Sayigh.