Table of Contents

Underpinning the entire military economy is the ability of the Egyptian Armed Forces to leverage its official primary role in defending the nation and the formal and informal powers it wields within the Egyptian state. These are anchored in laws and their implementing regulations, presidential decrees, and other instruments that empower the Ministry of Defense and its affiliated agencies (including the EAF and its various departments), Ministry of Military Production, and the autonomous Arab Organization for Industrialization to engage in diverse forms of economic activity outside the specific, narrower sphere of defense production. This legal and regulatory framework imbues military economic actors with three critical advantages: legal permissibility, discretionary powers, and lack of transparency.

The gray area between what the legal framework explicitly authorizes and what it does not expressly prohibit has allowed new forms and avenues of commercial activity that are blatantly self-serving yet not strictly illegal. But the legal veneer of permissibility—behavior that is “undesirable but legally permitted,” to borrow a phrase from interpretations of Islamic jurisprudence—has eroded severely over time, leading to substantial encroachment on public and private assets and to frankly illegal practices. At the same time, the military has colluded with others in the governing bureaucratic constellation, of which it is a part, to promulgate legal instruments or administrative regulations (such as nontariff barriers to trade) with the specific purpose of circumventing domestic laws or international trade agreements that threaten to constrain it, while remaining formally within the law.

The gray area between what the legal framework explicitly authorizes and what it does not expressly prohibit has allowed new forms and avenues of commercial activity that are blatantly self-serving yet not strictly illegal.

The defense sector—broadly comprising all the military agencies listed above—moreover exercises very considerable discretionary powers. Over the past four decades it has acquired, and in some instances appropriated, the right to award commercial contracts, make substantial investments, and “gift” funds or other assets—such as land, bridges and highways, and food—to other state bodies, quasi-governmental organizations, and the general public, without requiring prior approval or subsequent ratification from any external authority. Nor do military agencies have to coordinate with any state body responsible for economic planning or management when designing or implementing their own trade, production, and investment strategies; forming business partnerships; or disposing of the proceeds.

The defense sector’s ability to veil its activities in the name of national security has exacerbated the opacity of information about financial transactions that is typical of many state institutions in Egypt, and which accounts for its poor ranking in Transparency International’s Corruption Perceptions Index, which worsened to 105 out of 180 countries in 2018 (from 94 in 2014).1 But the lack of transparency has played an enabling role in the evolution of the military economy that is particularly perverse. The formal military economic sector may make claims about its efficiency in comparison to civilian or private competitors, but such claims cannot be independently corroborated or challenged. This opacity has also contributed to an environment in which insider trading, diversion of state resources, and racketeering can take place.

These trends have accelerated thanks to the assurance of impunity. The bulk of the formal military economic sector does not fall within the remit of Egypt’s audit and anticorruption agencies, whether de jure or de facto. Indeed, the most powerful of these agencies—the Administrative Monitoring Authority—is headed and heavily staffed by EAF officers—some retired but mostly still in active service—ensuring an additional layer of protection from inspection. A legislative decree issued by the ruling Supreme Council of the Armed Forces in May 2011 moreover transferred the authority to determine whether EAF officers accused of illicit gains should be tried in military or civilian courts to MOD prosecutors, even if the suspects had left service. Coming against a backdrop of neoliberal economics and crony privatization since the early 2000s that have opened up new opportunities for well-positioned actors, the outcome has been both a sharp acceleration and qualitative transformation of the military economy.

Reproducing Egypt’s Rentier System: The Historical Trajectory

Egyptian defense officials have cited various justifications for military involvement in the civilian economy. They stress the need to utilize spare capacity in the defense industry, and above all repeatedly insist that military companies and EAF agencies are able to deliver products and services (especially construction) at lower cost, break market monopolies in certain commodities, and contribute directly to socioeconomic development and trade. But although the contribution to providing public infrastructure and jobs is real, the rest of these claims are largely false and depend on several sleights of hand in how costs and benefits are calculated.

Instead, the military economy’s primary mode is rentier. It replicates the regime logic of utilizing public resources to appease key constituencies—heavily concentrated in the public sector and state institutions—while seeking rent income for itself. Contrary to the suggestion that sound economic or commercial thinking has driven it at any stage, the military economy has in fact evolved principally by capturing income streams generated by its privileged access to state-controlled funds and assets and to public contracts. Along with both public and private sector civilian counterparts, military institutional actors and interest groups have seized the opportunities opened up by major political developments in Egypt’s international and domestic environments to consolidate and expand their structural advantage within the economy.

The military economy’s primary mode is rentier. It replicates the regime logic of utilizing public resources to appease key constituencies—heavily concentrated in the public sector and state institutions—while seeking rent income for itself.

The trajectory of the military economy bears this out. Egypt’s modern defense industry was built under then president Gamal Abdel Nasser in the 1950s and 1960s, in the dual context of the conflict with Israel and of an era when economic nationalism and import substituting industrialization strategies were popular among developing countries. This was also a period in which the EAF officers were called on to assume managerial roles in the state bureaucracy, partly to provide technical skills and reduce the nascent republican regime’s reliance on the civil service it had inherited from the monarchy. The defense industry’s foray into civilian production starting in the late 1950s proved a failure, however, and the military did not become involved, as an institution, in public works and the civilian economy up to Nasser’s death in 1970.

The presidency of Nasser’s successor, Anwar Sadat, was initially marked by his struggle to contain and dismantle hostile factions in the armed forces and security services. But this gave way in the second half of the 1970s to reducing Egypt’s defense burden, resolving its perennial shortage of capital, and demilitarizing domestic politics and government. This reorientation moreover unfolded amid a strategic reorientation of military and economic ties away from the Soviet Union, toward the West, and the peace process with Israel.

These priorities shaped the military economy. In 1975, Sadat launched the AOI, a commercial military enterprise funded by Saudi Arabia, Qatar, and the United Arab Emirates, as a means of drawing significant investments to Egypt and making the country a regional industrial hub. Four years later, the peace treaty with Israel allowed significant reductions in the armed forces and defense budget. The EAF led reconstruction and rehabilitation of urban centers and infrastructure in the Suez Canal zone, funded partly by international assistance, positioning it to assert de facto claims to economic assets and activities there subsequently. The MOD was authorized to produce the EAF’s basic needs of food, noncombat equipment, and services, for which purpose Sadat established several economic agencies. From placating the EAF officer corps in the wake of the Camp David Accords with Israel, the focus of economic activity shifted to ensuring their living standards at a time of budgetary constraints.2

By one estimate, defense spending had already been reduced from 16 percent of GDP in 1970 to 9 percent in 1978, so further cuts were largely nominal, achieved mainly by moving select expenditures off government books.3 But they set the stage for the rise and diversification of a parallel military economy under Hosni Mubarak, who assumed the presidency in 1981. Over the next thirty years, the military economy underwent three distinct phases, each shaped by similar convergences of political and economic factors and equally dependent on the sector’s status as an enclave enjoying state protection.

In the first decade, Mubarak endorsed the MOD’s self-supporting approach as a means of securing political influence within a restive officer corps while shifting defense costs at a time of deepening financial austerity. U.S. economic aid of $250 million annually and other Western credit lines did not compensate fully for the cessation of official Arab budgetary assistance and development loans in 1978 or for declining revenue from petroleum exports as global oil prices dropped sharply during the 1980s.4 Pressure from international financial institutions to reduce the defense budget inadvertently encouraged the growth of a largely off-budget military economy. So did the behind-the-scenes contest for power between Mubarak and then defense minister Field Marshall Abdul-Halim Abu-Ghazalah, who used military production of civilian goods and services and the proceeds from exporting surplus weapons and ammunition to Iraq during its war with Iran to cement his own standing within the EAF and with the general public.

The MOD invested in food production, constructed housing and infrastructure, leased state-owned facilities placed under its authority (such as ports in the Suez Canal zone), and leveraged its control of military zones around the capital and other cities to acquire a financial return on approving the use of land for state-funded projects. Notably, military entry into food sectors such as macaroni, dairy, or bottled water mimicked the behavior of the large numbers of so-called infitah companies that had appeared in response to the economic liberalization policy introduced by Sadat in the previous decade. The military’s market share was probably much smaller than commonly assumed, therefore, and it was almost certainly leasing and land use licensing that provided the MOD with seed capital for expansion in the next stage.5

Mubarak’s dismissal of Abu-Ghazalah in 1989 marked a second phase, centered on a simple trade-off: the military could increase its economic engagement in return for staying out of politics. Mubarak had been compelled in 1986 to rely on the EAF to quell a rebellion by the Central Security Forces—a large paramilitary organization attached to the Ministry of Interior (MOI)—thus empowering Abu-Ghazalah. To confront the growing jihadi insurgency in the 1990s, in contrast, the president relied chiefly on the police and internal security agencies. He increased the Ministry of Interior’s manpower and budget at a rate far exceeding the MOD’s, and assigned the MOI’s State Security Investigations department to monitor EAF officers and influence their promotion.6

Abu-Ghazalah’s successor as minister of defense, Colonel General Youssef Sabri Abu-Taleb, curbed the military economy’s expansion.7 His tenure only lasted two years, but Field Marshall Mohamed Hussein Tantawi, who succeeded him in 1991, proved fully compliant with Mubarak’s goal of marginalizing the military politically. The new defense minister oversaw a veritable mushrooming of the officers’ republic as he worked to co-opt the senior officer corps: during his tenure, which was to last an unprecedented twenty years, it became standard for EAF retirees to move into posts in the state bureaucracy and public sector companies, often in sectors related to those they had served in (such as aviation or maritime transport), which literally became sinecures of those branches of the EAF.

The timing was propitious. The partial write-off of Egypt’s $50 billion debt to Western countries in return for its support for the U.S.-led intervention in the 1990–1991 Gulf crisis eased budgetary pressures on the government, while the simultaneous launch of a sweeping privatization program of state-owned companies also increased revenues. This allowed the transformation of military-owned defense companies and factories into public businesses governed by commercial rules and regulations, effectively privatizing profits while socializing losses. These and other military agencies diversified their activities and business partners over the next decade, but there is little evidence that their overall turnover or percentage of GDP grew dramatically in this period—although both presumably grew in tandem. The more important consequence of this economic reorientation was that it helped expand the military’s share of public works contracts and replicate the pattern of real estate speculation and insider trading that characterized the wider economy, in effect serving the officers’ republic more than the formal military economy.  

Resumption of the privatization program in the 2000s signaled a third phase, offering the military an opportunity to extend further into the civilian economy. It did so partly by acquiring a few failing state-owned companies or establishing new military companies, but also by seeking partnerships and joint ventures with Egyptian and foreign private businesses. Nonetheless, although the military was able to consolidate its economic enclave, this was not a period of unbridled growth. The formal military economy remained heavily reliant on MOD management of public works such as land reclamation and construction of new cities. Instead it was crony businessmen close to Mubarak, his son Gamal, and the ruling National Democratic Party who reaped the principal benefits of privatization, capturing market share in important economic sectors and overshadowing the military as the source of political connections sought by both public and private companies to win contracts. This loss of influence was a factor in the military’s discomfort with, and at times open opposition to, privatization of key state assets and the grooming of Gamal Mubarak to succeed his father, setting the stage for its siding against him during the 2011 uprising.

A brief interregnum followed Mubarak’s ouster in February 2011. The Supreme Council of the Armed Forces, which assumed the president’s powers, appeared not to have clear plans for expanding the military economy, but revealed its determination to preserve what it already had, which it regarded as necessary for meeting the needs both of the EAF as a whole and of its officers and enlisted personnel. This was the blunt gist of the statement by the assistant defense minister for finance and SCAF member in April 2012, that the military would not allow anyone “to interfere with EAF ventures.”8 Just how far the military would go to defend its stake was highlighted in spring 2013 when the MOD publicly compelled then president Mohamed Morsi (elected in 2012) to abandon his plans to place development of the Suez Canal zone, which the military saw as its exclusive economic preserve, under a new civilian body attached to the presidency.

This open challenge came mere months before the EAF ousted Morsi in July 2013. Having toyed with a succession of constitutional amendments enshrining its budgetary and operational autonomy from any civilian authority, the EAF now assumed a position of complete power and unbridled opportunity. If the 2011 revolution had seemed momentarily to threaten the protected status of the military economy, any remaining constraints on it were in fact removed. Under Sisi, who was elected president in May 2014, the military has emerged as a principal economic broker and manager.

Figure 2: Timeline of the Evolution of the Military Economy Since the 1950s

 
1952

The Free Officers Movement overthrows the monarchy, establishes the republic in 1953

 
Egyptian president Gamal Abdel Nasser at the opening ceremony of the Al Nasr automobile factory at the Helwan Steel Works
1954

The Ministry of Military Production is established

 
1956

Gamal Abdel Nasser’s presidency begins

 
1961

July So-called socialist decrees issued, nationalizing private companies and assets

Then defense minister Abdel Hakim Amer appointed to head the Higher Council for Public Enterprises of an Economic Character

 
1963

Egyptian military intervenes in Yemen’s civil war (which ends in 1967)

 
1964

The Administrative Monitoring Authority is established

 
1965

An EAF officer is appointed to head all major land reclamation schemes

 
1967

Six-Day War

 
1970

Anwar Sadat’s presidency begins

 
1973

October Yom Kippur War

 
1974

Start of infitah policy (economic “opening up”)

 
1975

The Arab Organization for Industrialization is established

 
1978

Camp David Accords signed with Israel; the EAF takes a lead role in reconstruction and rehabilitation of urban centers and infrastructure in the Suez Canal zone

 
1979

Peace treaty signed with Israel; annual U.S. economic and military assistance starts

The National Service Projects Organization is established

 
1981

Lieutenant General Abdul-Halim Abu-Ghazalah appointed minister of defense, plays a major role expanding the military economy in the 1980s

The General Services Agency is established

The EAF’s Land Projects Agency is established

Hosni Mubarak’s presidency begins

 
1983

MOMP subsidiaries reclassified as public sector companies

 
1984

The National Authority for Military Production is established

 
1985

Creation of “civilian construction brigades” under the MOD (comprising EAF conscripts)

 
1991

Launch of privatization under the Economic Reform and Structural Transformation Program; military-owned defense companies and factories become public businesses governed by commercial rules and regulations

Lieutenant General Mohamed Hussein Tantawi appointed minister of defense, oversees the expansion of the officers’ republic

 
1994

Founding Arab partners relinquish their shares in AOI, leaving it wholly owned by Egypt

 
(Amanda Hsu Perkins / Alamy Stock Photo)
2003

The Maritime Industries and Services Agency (under the MOD) is established; the agency receives control of Egyptian Ship Building and Repair Company and Alexandria Shipyard

 
2004

Privatization program relaunched under government of then prime minister Ahmed Nazif

 
2011

Amid a general uprising, Mubarak is ousted, and the Supreme Council of the Armed Forces assumes the president’s powers

 
2012

June Mohamed Morsi’s presidency begins

 
2013

March–May The MOD and Morsi clash over economic development of Suez Canal zone

July The EAF overthrows Morsi, and Adly Mansour named interim president

September Start of massive increase in major public works and procurement contracts managed by military agencies

 
(Hans Splinter)
2014

May Abdel Fattah el-Sisi’s presidency begins

August The MOD launches Suez Canal expansion

 
2015

March The MOD launches new administrative capital project

November Inauguration of Suez Economic Development Corridor program

November The EAF’s Land Projects Agency authorized to form joint ventures with Egyptian and foreign companies, and to use military-designated land as equity

 
2016

February The Administrative Capital Urban Development Company is made a public limited company (owned by the Land Projects Agency, NUCA, and NSPO)

 
2017

Administrative Monitoring Authority’s jurisdiction is explicitly limited to civilian individuals and bodies, effectively excluding the military

 
2018

December Egypt Defense Expo held for the first time

The Legal Framework

The enabling legal framework of the military economy has evolved continuously under the successive presidential administrations that have governed Egypt since the Free Officers seized power in 1952. The foundations were laid in the Nasser era, during which the military was exempted from paying taxes, fees, and duties and shielded from government regulations on procurement and other aspects of financial management and reporting required of the rest of the public sector. Later amendments under the Sadat, Mubarak, and Sisi presidencies reaffirmed or expanded these exemptions; reinforced the military’s autonomy, discretionary powers, and exception from divulging information to civilian authorities or submitting to external audit in relation to its about its finances; broadened its control of public assets such as land; and generally widened the scope of its economic and commercial activity.

The foundations for the military economy were laid in the Nasser era, during which the military was exempted from taxes, fees, and duties and shielded from regulations on procurement and financial management and reporting.

The special status of the military was confirmed shortly before Nasser became president of the republic in 1956. Decree 263 of 1956, which he issued while still prime minister, exempted the military’s “secret stores” from inspection by the state’s central Accounting Department (Diwan al-Muhasabah) and the Ministry of Finance and Economy, empowering the MOD to undertake this role and report on its findings to them instead.9 This was probably the basis for the exclusion of all military agencies and assets from civilian monitoring and audit ever since. Law 204 of 1957 next exempted the MOD and its associated entities—chiefly the EAF at the time—from “taxes and fees and financial regulations and laws amending them” in relation to armaments contracts and customs duties on imports.10 Although significant numbers of EAF officers were appointed to senior posts in the state bureaucracy—1,500 of them in 1954–1962, by the estimate of Egyptian sociologist Anouar Abdel-Malek—the military had not yet come to play a direct, formal role as an institution in the national economy.11 Indeed, the MOMP, which was set up in 1954, performed so poorly that it was abolished in 1969.

The real impetus for the development of the formal military economy and its legal framework came under Sadat, albeit in distinct stages. The new constitution of 1971 gave the president authority to oversee and approve defense contracts, which was expanded in Law 29 of 1972 to include arms imports and related defense allocations (subject to ratification by parliament) and the additional power to authorize spending beyond the approved budget.12 Sadat later used Law 29 to extend his presidential prerogatives in other ways. The revised Armed Forces Retirement, Social Security, and Pensions Law 90 of 1975, for example, drew on the president’s powers under Law 29 to prevent EAF personnel who took civilian jobs from receiving their military pensions at the same time as their new salaries. (In 1995, nearly fourteen years after his death, the Constitutional Court ruled that Sadat’s use of Law 29 to modify this provision of Law 90 had been unconstitutional. But the law and the provision both stood.13) And in 1980, Sadat ended the exemption of the quasi-military AOI from applying this provision of Law 90 to the retired EAF personnel it employed.14 In Law 146 of 1981, he again claimed Law 29 as the basis for expanding his powers of oversight and approval to include defense exports.

The real impetus for the development of the formal military economy and its legal framework came under Sadat, albeit in distinct stages.

The preceding laws did not relate to the military economy directly, but they established a pattern of presidential prerogative and intervention that set it on an upward trend in the second half of Sadat’s presidency and laid the basis for its accelerated expansion under his successor, Mubarak. Sadat had reinstituted the MOMP in 1971, but it remained largely dormant, and so the announcement of the AOI in 1975 represented the first significant step in building up the military economy. The AOI was in fact an anomaly: Law 12 established it not as an Egyptian company but as an “international organization,” because it had been set up in partnership with several Gulf states.15 Consequently, it was governed by its own bylaws rather than government regulations. But Sadat moved formal military agencies in the same direction. He had already relieved them of other, lesser fees, such as the so-called jihad tax levied under Law 117 of 1973, to support the national defense burden. He later extended the MOD’s exemption from paying customs duties under Law 204 of 1957 to both the MOMP and the AOI. And when he established the National Service Projects Organization (NSPO) in 1979, he empowered it to regulate itself independently of the Ministries of Defense and Finance and freed it from complying with government regulations on procurement, accounting, and auditing.

Most important, however, was the legal foundation that Sadat laid for the military’s formal control of the use of state land, which has proved to be one of its foremost assets. Law 38 of 1977 had already required tourism agencies to obtain MOD permission in order to operate in border areas, which included the country’s coasts, a principal tourist destination.16 Presidential Decree 143 of 1981 expanded this requirement to include all “desert land,” that is, any area not previously registered in cadastral surveys as zimam—owned by legal persons or entities, public or private, and subject to real estate tax.17 This encompassed an estimated 90–95 percent of Egypt’s total surface area, thereby expanding the military’s potential economic benefits significantly. Sadat followed this up with Law 531 of 1981 establishing the EAF Land Projects Agency, which was allowed to generate income from military real estate, much of which lay in desert and border areas.18

The Mubarak era expanded the prerogatives and trends established under Sadat, putting the military economy on an accelerated growth path. Law 186 of 1986 extended the customs exemption in Law 204 of 1957 to include all imports of equipment, transport vehicles, medicine, and other noncombat items, in addition to arms.19 Since then, in fact, all commodities imported by military agencies are exempt from duties, including food intended for sale in civilian markets. Law 11 of 1991 also exempted the MOD and all its affiliate branches and agencies from the sales tax, an exemption that was extended in Law 17 of 2001 to all the commanders of all EAF branches, departments, agencies, and funds, as well as to companies belonging to the AOI and MOMP.20 All exemptions were routinely renewed, moreover; the exemption from customs duties was reaffirmed in Law 91 of 2005, for example, and all EAF facilities that offer commercial services (hotels, clubs, hospitals and clinics, cinemas, and supermarkets) were exempted from the real estate tax levied under Law 196 of 2008.21

The Mubarak era expanded the prerogatives and trends established under Sadat, putting the military economy on an accelerated growth path.

In parallel, MOMP companies were reclassified in 1991 in accordance with Public Sector and Companies Law 97 of 1983, which provided for the formation of joint stock companies.22 Two years later, the Council of Ministers decreed that MOMP companies would be relieved of the costs of defense production, which would instead be borne by the state treasury. (In theory, at least, this decree did not apply to their civilian production, but in practice the distinction does not appear to have been enforced, if annual accounts released in 2011 are a guide to their accounting practices.) In the meantime, cargo destined for military firms was additionally exempted from inspection at the country’s ports of entry. Possibly at this time also, MOMP companies were allowed to defer budgetary surpluses, that is, carry them forward to the next accounting year; these were deposited in “special funds” that they subsequently retained as disposable capital.

These legal developments reinforced the military’s special corporate status and prepared the ground for its economic expansion. But two stood out in particular: Law 89 of 1998 on bids and tenders, and the series of laws granting extensive military control over state land culminating in Presidential Decree 152 of 2001 designating “strategic areas of military importance in desert land.”

In the first instance, Egypt is a member of the World Trade Organization, but is not party to its Government Procurement Agreement.23 This explains the significance of Law 89, which awarded government ministries and agencies extensive power to award contracts up to a certain value and within specific domains by what is commonly known as “direct order”—that is, on a no-bid, noncompetitive basis. Crucially, the law conferred the same power on the MOD and MOMP.24 Consequently, all parts of the formal military economy can follow what is variously termed “limited bidding,” “local bidding,” “limited practice,” or “direct agreement” with contractors, and may delegate these powers in relation to any contract or activity falling within their remit without being subject to thresholds on the contract’s value.

Military authority over state land was formally expanded in 1988, when a prime ministerial decree required the Ministries of Agriculture and Land Reclamation; Housing, Utilities and Urban Development; and Tourism to obtain MOD permission to operate in areas it deemed of military importance.25 Law 7 of 1991 consolidated and updated this authority, by requiring newly established general economic authorities also to coordinate their planned land uses and zoning with the MOD, and granted the president the additional power to delineate desert areas as strategic and of military importance.26 Law 5 of 1996 did not relate to the military, but in empowering the president to set the rules and procedures governing the disposal of state land to investors for free or at nominal rent, it set the stage for the rampant speculation in real estate that was to follow, in which the military also engaged.27

The most significant development, however, came in Presidential Decree 152 of 2001, which empowered the president to designate “strategic areas of military importance in desert land.”28 This set out criteria that had to be met by any civilian agency or person seeking to undertake construction or other activity—whether over or under the ground, along roads, or off the shores of seas and lakes—within the vicinity of military installations.29 In effect, the decree granted the MOD discretion to designate land for commercial use.30 The location of strategic areas was to be determined by the MOD, which would also specify the distances to be maintained from their perimeters by new civilian construction, the permissible heights of structures built in the vicinity, and the technical specifications for waste-producing activities (solid, gaseous, or effluent) undertaken nearby.31 This was immediately followed by Presidential Decree 153 setting up the National Center for Planning State Land Uses, which sought to inventory and govern use of all state land, in coordination with the Military Survey Department; an MOD representative sat on the new center’s board, whose head was moreover to be approved by the ministry and has often been a retired EAF officer.32

Notably, these various laws coincided with the partial privatization process that Egypt underwent in stages between 1991 and 2009, and with sharp parallel increases in real estate speculation and corruption. The award of contracts by direct order underpins the ability of military companies to sell products of inferior quality or at inflated prices to government agencies, and enables the military to award contracts for government-funded projects they manage to favored private contractors (or those willing to pay hefty bribes, as numerous interviews conducted for this report confirm). A former member of the short-lived government of prime minister Hesham Qandil (2012–2013) later claimed, for instance, that senior officials in his ministry had ordered its procurement department to pay a defense industry company 400 million Egyptian pounds (then approximately $63 million) for mobile phones worth some 50 million Egyptian pounds on the open market.33

Similarly, the MOD has used its effective veto power over the use of state land and physical access to zones containing exploitable natural resources to exact licensing fees and under-the-table payments—neither of which can be quantified, but which must be considerable—from both private investors and government agencies such as the Ministries of Housing and Transport, which depend heavily on access to state land. Senior officials including the assistant defense minister for financial affairs have repeatedly claimed that the MOD merely seeks compensation for military facilities that must be dismantled or moved or for ceding land designated for military use. But such designations are always asserted ex post facto, and cannot be substantiated as the maps they are based on are kept secret. The MOD heads a “hierarchy of de jure control over unallocated public land,” as a World Bank report noted in 2006.34 Obtaining military clearance for land use applications could take more than a year, creating a powerful incentive for applicants to pay bribes in order to expedite the process or jump the queue.35 The MOD’s special role in land management has moreover provided officer networks with inside information, enabling them to purchase desert land at rock-bottom prices before planned developments push up its value. Possibly in response to the threat of legal action that surfaced after the 2011 revolution, SCAF head and acting president Tantawi issued Presidential Decree 45 empowering military prosecutors to determine whether accusations against EAF officers should be referred to military courts or civilian agencies, effectively removing this power from the attorney general’s office.36

Predictably, all military exemptions, prerogatives, and privileges have been reconfirmed and expanded since the EAF coup d’état of July 2013.

Predictably, all military exemptions, prerogatives, and privileges have been reconfirmed and expanded since the EAF coup d’état of July 2013. A foremost instance was the amendment issued in September 2013 by interim president Adly Mansour to Law 89 of 1998 on bids and tenders, which raised the upper limits on the value of contracts that government ministers and agencies could issue directly to contractors of their choice without open bidding, “in case of emergency.” The MOD, MOMP, and their affiliated bodies were similarly empowered, as was the AOI some months later; crucially, the amended law did not state a threshold for their no-bid transactions.37 Furthermore, although Article 9 of the amended law related specifically to armament contracts as defined under Law 204 of 1957, it has been taken to apply to all contracts issued by military agencies to civilian suppliers and subcontractors, including for government-funded public works.

The EAF’s resurgent political influence after 2011 and its growing role in economic management after 2013 have translated into a sharp increase in the award of contracts by direct order to the Egyptian private sector, which derives a major part of its income from public works and procurement contracts, expanding the scope for corruption and cronyism. Presidential Decree 32 of 2014, which banned third-party challenges to contracts awarded by government agencies, reinforced the ability of well-positioned actors, including the military, to capture lucrative income streams and protect themselves from inspection and prosecution at the same time. The main purpose was to prevent legal challenges to the award of public contracts and protect both the government officials awarding them and the contractors.38 At the same time, Law 5 of 2015 exempted military agencies from complying with the requirement that government procurement contracts prefer Egyptian manufactured goods, allowing them to turn to foreign imports if they wished.39

Several subsequent laws related to the military more directly. Most significantly, Presidential Decree 446 of 2015 authorized the EAF Land Projects Agency to utilize its assets as equity in forming joint ventures with domestic and foreign companies. Exactly one month later, Presidential Decree 127 authorized any government entity to establish public limited companies after obtaining cabinet approval, paving the way for further military companies and joint ventures.40 The effect of granting the military commercial utilization of state land and, de facto, retention of all incomes arising from that, was demonstrated when Presidential Decree 57 of 2016 instructed the agency to form a public limited company (along with the MOD’s NSPO and the Ministry of Housing’s New Urban Communities Authority) to manage the new administrative capital project and the Sheikh Mohammed bin Zayed City.41 These decrees further magnified the scope for real estate speculation, reflected, for example, in the discernible shift of commercial land developers’ attention from previously desirable areas such as New Cairo to the new capital.

The military’s tax exemptions have also been reaffirmed or extended. In 2016, military agencies were again exempted when the sales tax was converted into a value-added tax (VAT) as part of IMF-inspired reforms.42 The military does not have to pay VAT on goods, equipment, machinery, services, and raw materials needed for the purposes of armament, defense and national security, nor on any goods or services sold by military agencies and outlets such as MOD-owned hotels or NSPO petrol stations. And when Sisi imposed a 25 percent levy on the deferred surpluses of governmental “service, economic, and national general authorities” to the benefit of the state treasury in the same year, he exempted the National Authority for Military Production, which manages MOMP companies.43 In May, Presidential Decree 233 designated twenty-one national roads as “strategic zones of military importance” that, combined with prior laws, effectively granted the MOD exclusive commercial franchise along them.44 Five months later, amendments to the Military Judiciary Law brought all incidents occurring at or in civilian areas and facilities run by the military, such as petrol stations serving the general public, under the jurisdiction of military courts.45 Legislation passed in 2014 had already placed all “public and vital facilities,” such as ministries and universities, under military jurisdiction for two years, and in 2016 this law was extended to 2021.46 Other advantages followed, such as the exemption of the defense sector from a 43 percent government-mandated increase in electricity prices imposed on industrial manufacturers in 2018.47  

Last but not least, the military economy was shielded even further from external audit. The de facto exclusion of the military generally from inspection by the Administrative Monitoring Authority (AMA), Egypt’s main audit agency, was made de jure when its jurisdiction was specifically limited to civilian individuals and entities in Law 207 of 2017.48 As importantly, the same law made the AMA directly accountable to the president, who was also given the power to appoint its head, effectively confirming it as a tool of presidential power and cementing his influence over the military. Former prime minister Ibrahim Mahlab had moreover designated the AMA two years earlier as a government agency whose contracts were classified as secret “for national security reasons,” effectively exempting it from Law 5 of 2015 requiring government agencies “to buy Egyptian” and further enhancing its distinctiveness and autonomy from civilian agencies.49

Extending and Bending the Rules

The legal framework summarized above reveals a skeleton upon which are hung a host of prerogatives that appear to be asserted de facto as often as awarded de jure, and from which emanate practices that range from the formal to the informal and frankly illegal. The military economy operates within a complex and labyrinthine body of laws and bylaws that are not harmonized and often conflicting, having accumulated over decades during which powerful institutional and social constituencies lobbied hard to acquire or preserve economic gains as the government instituted major changes of economic orientation: from the capitalist mode of the pre-1952 monarchy, through socialist nationalization under Nasser, controlled liberalization under Sadat, and finally under Mubarak to a nominally free market system that in fact combines an extensive residual role for the state in ownership and capital expenditure along with crony capitalism. An equally complex and fragmented administrative structure for managing public finances and assets makes it even harder to enforce rules and regulations that, to paraphrase the 2006 World Bank report cited previously, encompass a multitude of differentiated, nontransparent, complex, and arbitrary procedures.50

Among the numerous legally sanctioned advantages enjoyed by the formal military economy are preferential access to building materials, public infrastructure, subsidized energy, and, crucially, hard currency at discounted rates.

Among the numerous legally sanctioned advantages enjoyed by the formal military economy are preferential access to building materials, public infrastructure, subsidized energy, and, crucially, hard currency at discounted rates.51 Some advantages are provided in laws of establishment and may also be enjoyed by civilian public agencies and private businesses (such as energy subsidies). But others may be tucked away in bylaws such as those of the revised Mineral Wealth Law 198 of 2014, for example, which required MOD approval for the extraction of mineral wealth anywhere in Egypt and empowering it to levy fees on all output at production sites.52 Military economic entities can furthermore maintain deposits in banks of their own choosing—unlike civilian government agencies that may only hold accounts with the Central Bank of Egypt—and can hold foreign currency accounts and access extra-budgetary financing without government supervision.

Table 1: The Egyptian Military’s Economic Advantages53
Land Legal right to use military-designated land as equity in commercial joint ventures; Power to award or withhold licenses for use of state land by any civilian individual or entity, public or private
Labor Use of free conscript labor
Taxes, duties, and fees Exemption from income tax, property tax, customs duties, and other fees and levies
Energy Government subsidies (also available to big civilian businesses) benefit energy-intensive military construction and industry
Foreign currency Military receives favorable exchange rates; Military may retain foreign currency in special bank accounts
Audit No civilian agency has power to audit military agencies; De facto military control of the Administrative Monitoring Authority protects the military and can be used to intimidate and punish civilian businesses
Permits Informal power to expedite or delay bureaucratic paperwork needed by civilian investors, exercised through retired officers in state agencies

But the military economy also benefits from a marked degree of ambiguity. Senior defense industry officials have occasionally claimed that the sector is subject to normal taxes, but this is certainly untrue. In January 2017, Minister of State for Military Production Major General Mohamed al-Assar made a significant distinction by stating that the industry paid taxes, customs duties, and social security contributions on the civilian side of its production, while acknowledging that similar payments were not made on military output.54 But confusion remains about the legal status of military companies that are registered as part of the public business sector, and of the joint ventures with private companies, both domestic and foreign, that military agencies have been permitted to establish under Presidential Decree 127 of December 2015. Nominally, they should come under normal tax regulations, but in practice they do not, as Assar admitted. Nor is there any evidence (or public claim) that the MOD pays taxes or other contributions on net income its agencies make from managing public works projects. No less importantly, all military entities, facilities, and assets come exclusively under the jurisdiction of military courts, and so the rights of civilian business partners involved in joint ventures or even as subcontractors fall into a legal gray zone that has yet to be tackled by Egyptian legislators or policymakers.

Similarly, Law 6 of 1984 establishing the National Authority for Military Production (NAMP), which oversees MOMP companies and factories, confirmed that their boards of directors would receive bonuses and incentives and a share of profits. The introduction of commercial incentives followed practice in the rest of the public business sector after 1983, but the absence of external oversight over the defense industry meant that there has been no way of verifying actual performance or confirming that profits (net of all expenses and contingencies) have in fact been made. NAMP annual balance sheets released in 2011 showed none, and Assar has repeatedly acknowledged that most MOMP companies incur losses, suggesting that bonuses and shares of supposed profit are calculated on the basis of turnover (overall financial flows handled) and distributed to directors and managers before net balances are calculated. A decree issued by Sisi in September 2016 that personnel of the NAMP and its subsidiary companies should receive “not less than 25 percent of net profits” (emphasis added), but the lack of transparency surrounding NAMP financial accounts and bylaws prevents definitive assessment, not only of its economic viability, but also of legal compliance.55

All military entities, facilities, and assets come exclusively under the jurisdiction of military courts. The rights of civilian business partners involved in joint ventures or even as subcontractors fall into a legal gray zone.

As noted previously, the formal military economy is empowered by law to operate outside much of the regulatory framework that applies to other state institutions. In some cases, as with the mining sector noted above, specific bylaws govern the military’s income generation from public assets or natural resources. Less clear is what regulates the charging and retention of fees or profits from public works and commercial franchises, investments in and dividends from commercial companies, and employment of conscript labor, both in the latter and in profit-making activities. The latter example is particularly egregious. EAF conscripts are used as cheap labor in virtually all sectors of the military economy. The practice started in 1986 when then minister of defense Field Marshall Abdul-Halim Abu-Ghazalah announced that 30,000 conscripts would be organized into so-called development battalions to contribute to the national economy.56 Over thirty years later, these battalions (now known as civilian construction brigades) are still employed to implement publicly funded projects, especially in construction, agriculture, and land reclamation, whether undertaken by public or private contractors. MOD, MOMP, and AOI companies also employ conscripts who are in their final six months of service, and sometimes for considerably longer, and interviews confirm that skilled conscripts are routinely loaned to private sector companies.

Last but not least is the extent to which the military’s legally sanctioned presence in various state bodies and informal relationships with civilian officials and legislators enables rules to be bent to benefit the formal military economy. Political scientist Robert Springborg noted, for example, how Abu-Ghazalah used his position as chairman of the Ministerial Policy Committee in the 1980s to award land reclamation contracts to military agencies or withhold them from their public sector rivals (and offer sweet deals to retired EAF officers and private sector businessmen).57 A World Bank working paper published in 2018 confirmed that such political connections remained important in obtaining government contracts to procure goods or services, some thirty years later.58 More generally, as big businessman Naguib Sawiris complained, the military can get work done because “when it gets involved permits are unimportant, it doesn’t have to pay bribes, and it can overcome all the problems that we all wish we could overcome.”59

Military agencies and affiliated companies or private sector partners also benefit from other legal devices such as nontariff barriers to trade, which can be designed to favor particular companies and exclude competitors, including foreign ones.

Military agencies and affiliated companies or private sector partners also benefit from other legal devices such as nontariff barriers to trade, which can be designed to favor particular companies and exclude competitors, including foreign ones. As economists Ishac Diwan, Philip Keefer, and Marc Schiffbauer note, trade protection is firm- and not sector-specific in Egypt, which had one of the highest nontariff barrier frequencies in the world in 2010.60 Government agencies can skew markets in additional ways: three months after the MOMP concluded a partnership with the Chinese firm Galantz to manufacture air conditioners locally in June 2016, for example, the authorities restricted the import of foreign-made air conditioners.61 Military agencies were able to secure a similar legislative amendment that blocked competition from more highly specialized Dutch companies for large water projects. And when legal devices fail, the EAF is known to resort to means such as blocking the entry of imported machinery to Egypt in order to compel companies to accept its terms—such as receiving a share of factory output—in return for issuing the necessary licenses allowing them to set up in certain geographical zones or manufacturing sectors.62

A Legal Balance Sheet

Military agencies are not alone in enjoying economic advantages afforded by the law. Many state agencies and public companies were also exempted from paying customs duties on imported goods during the Nasser era, subsequently reaffirmed in Law 91 of 1983.63 So were importers of goods and services for trading purposes, exports, basic foodstuffs, catering, natural gas, books and magazines, and goods used for scientific, educative, and cultural purposes. Most importantly, the private sector had been allowed to import building materials free of duties starting in 1977; this was a major advantage because construction, which accounted for a large part of public contracts awarded to the private sector, was never fully nationalized.64 But because the public sector continued to monopolize the distribution of building materials, officials could expedite or delay allocations to extract bribes and sell to the black market.65 Most of such advantages remain in place. Furthermore, as Egyptian political economist Amr Adly has noted, the private sector’s contribution to state revenue through taxes on industrial, commercial, and capital gains is also small, not exceeding 7 percent in 2008–2012, because of tax evasion among small and medium-sized enterprises and broad tax exemptions and government incentives for large companies.66 Similarly, property taxes from all sources averaged 2.9 percent of state revenue in the same period. Tax exemptions for the military are therefore part of a general problem for state revenue, and may not make an appreciable dent in the budget deficit on their own.

In fact, all economic actors in Egypt benefit from extensive loopholes in the regulatory framework, as a 2003 World Bank report described:

Although the Law and the Executive Statutes provide important concepts for public procurement and are based on sound principles, they are broad and not always sufficiently clear for consistent application. To compensate for this lack of clarity and completeness of the written law and statutes available to them, different ministries have created their own unwritten procurement “rules.” These unwritten “rules” have become known to bidders only through application to actual cases and can vary. Consequently, discretionary decisions by the Competent Authority have become the rule rather than the exception, as for example, in the selection of the applicable procurement method or acceptance of bid modifications after the bid opening.67

Military companies are also not alone in benefiting from the legal preference that allows awarding government contracts to Egyptian companies whose bids are within 15 percent of competing bids.68

The preceding emphasizes that, to a considerable degree, the problem for Egypt is not that the military is different from its civilian counterparts, but rather that it is very much the same. The military’s advantages are rooted in law, but along with many others in the state bureaucracy, it uses its considerable discretionary power to bend the rules and assert rights that are not explicitly sanctioned in law or that clearly exceed, if not frankly violate, its provisions. The legal and regulatory framework affords all wide scope to further their economic interests while remaining ostensibly within the law.

The problem for Egypt is not that the military is different from its civilian counterparts, but rather that it is very much the same.

What determines the balance between formality, informality, and illegality is the degree of political influence or connectedness of each interest group. This has not always favored the military; under Sadat, the balance shifted clearly toward the new, so-called infitah bourgeoisie, while National Democratic Party bosses and allied business cronies were the primary beneficiaries in the last decade of Mubarak’s rule. But his ouster in 2011 and the subsequent transformation of the military’s political and economic fortunes since 2013 have shifted the scales for the foreseeable future. The military’s full legal and constitutional autonomy from any form of civilian jurisdiction—whether executive, legislative, or judicial—ensure preservation of the military economy even as it intrudes into its civilian counterpart.

Table 2: Enabling Legal Framework69
Date Law Purpose
1956 Prime Ministerial Decree 263 Excluding Ministry of Defense Stores of a Secret Nature from Inspection by the Accounting Department and the Ministry of Finance and Economy By empowering the Ministry of Defense to undertake this role instead, the decree set the basis for the general exclusion of military agencies and assets from civilian monitoring and audit from there on.
1957 Law 204 on Exempting Armament Contracts from Taxes, Fees, and Financial Regulations Exempted military agencies from taxes, customs duties, and any other fees relating to armament contracts.
1964 Law 147 Amending Certain Rulings of Law 204 of 1957 on Exempting Armament Contracts from Taxes, Fees, and Financial Regulations Extended exemptions to include works and services contracts and the import and domestic supply of all equipment and machinery relating to those contracts.
1972 Law 29 on Authorizing the President of the Republic to Issue Decrees with the Force of Law Expanded the scope of the president’s powers to include arms imports and related defense allocations (requiring ratification by parliament) and the additional power to authorize spending beyond the approved budget).
1975 Law 90 on Retirement, Social Security, and Pensions for the Armed Forces Regulated all financial aspects of retirement, including entitlements of military personnel assigned to civilian jobs during active service.
1975 Presidential Decree 12 Ratifying an agreement from April 29, 1975, establishing the Arab Organization for Industrialization.
1976 Presidential Decree 150 on Immunities and Privileges of the Arab Organization for Industrialization Exempted the Arab Organization for Industrialization from all taxes, fees, and customs duties, and authorized it to open foreign currency accounts in any bank of its choosing in Egypt or abroad and to convert currency deposits freely.
1977 Law 38 on Regulating Tourism Companies Required tourism agencies to obtain Ministry of Defense permission in order to operate in border areas.
1979 Presidential Decree 32 on the National Service Projects Organization Established the National Services Project Organization under the Ministry of Defense.
1979 Law 59 on Establishing New Urban Communities Established the New Urban Communities Authority.
1981 Law 531 on Regulations for Disposing of Lands and Real Estate Vacated by the Armed Forces and Allocating the Revenue to Establish Replacement Military Cities and Zones Established the EAF’s Land Projects Agency.
1981 Presidential Decree 143 on Rules of Disposal of Lands and Real Estate Vacated by the Armed Forces and Assignment of Return to Construct Replacement Military Cities and Areas Expanded the requirement in Law 38 of 1977 for tourism agencies to obtain Ministry of Defense permission in order to operate in all “desert land” areas.
1981 Law 146 Amending Certain Rulings of the Law Mandating the President of the Republic to Issue Decree with the Force of Law Expanded the scope of the president’s powers to include oversight and approval of defense exports.
1983 Law 97 Concerning Public Sector Authorities and Its Companies Used as the legal basis for converting military companies into public sector companies.
1984 Law 6 Establishing of National Authority for Military Production Established the National Authority for Military Production under the Ministry of Military Production.
1986 Law 186 on Publication of Law Regulating Customs Exemptions Extended the customs exemption for military agencies to include all their imports of equipment, transport vehicles, medicine, and other noncombat items, in addition to arms.
1988 Prime Ministerial Decree 933 on Land Reclamation and Reconstruction Areas Required Ministry of Agriculture; Ministry of Land Reclamation; Ministry of Housing, Utilities, and Urban Development; and Ministry of Tourism to obtain Ministry of Defense permission to operate in areas it deemed of military importance.
1990 Presidential Decree 245 on Regulations Organizing Disposal of Revenue From Sale and Rental of Plots Vacated by the Armed Forces Expanding uses of revenue to include investment and service projects and other activities increasing funds for the EAF’s Land Projects Agency, allocation toward pay, bonuses and incentives, and allowances, and allocating 20% of income for armament purposes.
1991 Law 203 on Public Enterprise Exempted public sector enterprises including military companies from standard government procurement and contract procedures, and placed them on par with private sector firms in relation to salaries, benefits, pensions, bonuses, and so on.
1991 Law 7 on Some Decrees Relating to the Private Properties of the State Granted the president additional power to delineate desert areas as strategic and of military importance, and required general economic authorities also to coordinate their planned land uses and zoning with the Ministry of Defense.
1991 Law 11 on General Tax on Sales (replacing Law 133 of 1981) Exempted the Ministry of Defense and all its affiliate branches and agencies from the sales tax.
1996 Law 5 on Regulating the Disposal of State-Owned Desert Lands Empowered the president to set rules and procedures governing disposal of state land.
1998 Law 89 on Regulating Bids and Tenders Extended power to award contracts up to certain values on a no-bid, noncompetitive basis to the Ministry of Defense and Ministry of Military Production.
2001 Law 17 Amending Certain Rulings of the Law on General Tax on Sales Exemption from sales tax extended to all the commanders of all Egyptian Armed Forces branches, departments, agencies, and funds, as well as to companies belonging to the Arab Organization for Industrialization and Ministry of Military Production.
2001 Presidential Decree 152 on Designating Strategic Zones of Military Importance in Desert Land and Regulations Pertaining to Them Granted the Ministry of Defense discretion to block sale of land, claim it for military use, designate it for commercial use, and set criteria for all civilian construction or activity over or under the ground, roads, and shores near military zones.
2001 Presidential Decree 153 on Promulgating the Establishment of the National Center for Planning State Land Uses Requiring coordination of use of all state land with the Ministry of Defense.
2005 Law 91 on Income Tax Renewed exemption of military agencies from customs duties.
2007 Ministerial decree Determined that buildings in industrial zones anywhere in the country could not exceed 15 meters in height without Ministry of Defense (and civil aviation) approval.
2008 Law 196 on Tax on Built-Up Land Plots (Property Tax) Exempted all Egyptian Armed Forces facilities that offer commercial services such as hotels, clubs, hospitals and clinics, cinemas, and supermarkets from the real estate tax). Renewed annually by presidential waiver.
2011 Decree with the Force of Law 45 Amending Certain Rulings of the Military Justice Law 25 of 1966 Empowered military prosecutors to determine whether accusations against Egyptian Armed Forces officers should be referred to military courts or civilian agencies.
2013 Presidential Decree 82 Amending Certain Rulings of Law 89 of 1998 Regulating Bids and Tenders Applied upper thresholds on the award of contracts to civilian state agencies specifically, effectively excluding the Ministry of Defense, Ministry of Military Production, and their affiliates.
2014 Presidential Decree 32 Regulating Certain Procedures for Challenging State Contracts (status unclear) Banned third-party challenges to contracts awarded by government agencies. Parliament voted the law down in 2016, and its current status unclear.
2014 Presidential Decree 48 Amending Certain Rulings of Law 89 of 1998 Regulating Bids and Tenders Exempted the Arab Organization for Industrialization from the upper thresholds on the award of contracts contained in Law 89 of 1998.
2014 Presidential Decree 136 on Securing and Protecting Public and Vital Facilities Legislation designated vital infrastructure (such as power stations, oil and gas fields, railways, road networks and bridges) and unspecified public facilities as military and placed criminal acts affecting them under the jurisdiction of military courts for two years (extended in 2016 till 2021).
2015 Law 5 on Preference of Egyptian Products in Government Contracts Exempted military agencies from complying with the requirement that government procurement contracts prefer Egyptian manufactured goods.
2015 Presidential Decree 446 Amending Decree Regulating Rules for Disposal of Land and Real Estate Vacated by the Armed Forces Authorized the EAF’s Land Projects Agency to utilize assets as equity in forming joint ventures with domestic and foreign companies.
2015 Presidential Decree 127 on Licensing Public Law Persons to Establish Public Limited Companies Paved the way for other military agencies to establish public limited companies and joint ventures by allowing any state agency receiving government approval to join or establish commercial companies in accordance with public sector company laws 159 of 1981, 97 of 1983, and 203 of 1991.
2015 Prime Ministerial Decree 1657 Issuing the Implementation Statutes for the Mineral Wealth Law Required Ministry of Defense approval for the extraction of mineral wealth anywhere in Egypt and empowered it to levy fees on all output at production sites.
2015 Minister of Defense and Military Production Decree 68 on Exempting Certain Units Belonging to the Armed Forces From the Tax on Built-Up Plots Exempted facilities that offer commercial services (hotels, clubs, resorts and rest houses, parks, sports facilities, cinemas and stages, and supermarkets) belonging to 38 branches and departments of the Egyptian Armed Forces and Ministry of Defense from paying the tax and from inventorying and valuation.
2015 Prime Ministerial Decree 1196 on Designating the Administrative Monitoring Authority as an Authority Whose Transactions Require Confidentiality for National Security Reasons Shielded the Administrative Monitoring Authority, headed and extensively staffed by EAF officers, from any scrutiny, indirectly shielding formal and informal military economic activities.
2016 Law 69 Amending Certain Rulings of the Law Pertaining to the Establishment of the National Authority for Military Production Decreed that personnel of the National Authority for Military Production and its subsidiary companies should receive “not less than 25% of net profits.”
2016 Presidential Decree 57 Regarding Lands of the New Administrative Capital and the Sheikh Mohammed bin Zayed Urban Community to be part of New Urban Communities Areas Instructed the EAF’s Land Projects Agency to form a public limited company to manage the new administrative capital project and Sheikh Mohammed bin Zayed City.
2016 General Budget of the State for FY 2016–2017 Exempted the National Authority for Military Production (and its subsidiaries) from a 25% levy on the deferred surpluses of governmental service, economic, and national general authorities.
2016 Presidential Decree 233 on Allocating Desert Lands to the Ministry of Defense and Regarding Them as Strategic Zones of Military Importance Designated twenty-one national roads as strategic zones of military importance, effectively granting the Ministry of Defense exclusive commercial franchise along them.
2016 Law 65 Extending Application of Law 136 of 2014 on Securing and Protecting Public and Vital Facilities Extended Law 136 of 2014 (placing public infrastructure and facilities under military protection and the jurisdiction of military courts) for another five years, to 2021.
2016 Law 69 Amending Certain Rulings of Law 6 of 1984 Establishing the National Authority for Military Production Assigned distribution of 10% of net profits (after allocation for reserves) in cash payments to employees and 15% for purposes determined by the board of directors (such as employees housing and social services).
2017 Finance Minister Decree 66 on Implementation Statutes for Law on Value-Added Tax Exempted military agencies from value-added tax (converted from sales tax).
2017 Law 207 Amending Certain Rulings of Law 54 of 1964 on Reorganization of the Monitoring Authority Limited the Administrative Monitoring Authority’s jurisdiction to civilian individuals and entities, effectively excluding the military.
2018 Presidential Decree 244 of 2018 Designating the Ministry of Military Production as an Entity of Special Nature Exempted the ministry from applying Articles 17 and 20 of the civil service law of 2015 requiring competitive hiring to senior management posts.
2019 Presidential Decree 378 Allocating Desert Lands to the Ministry of Defense and Regarding Them as Strategic Zones of Military Importance Placed land with potential for tourist development around Zafarana and Gamsha Bay on the Red Sea coast under military control.
2019 Presidential Decree 380 Allocating Desert Lands to the Ministry of Defense and Regarding Them as Strategic Zones of Military Importance Placed 47 Red Sea islands with potential for tourist development under military control.

Notes

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