Table of Contents

The EAF’s takeover of power in July 2013 did more than remove any remaining restraints on the military economy. Whether by design or accident of Sisi, who provides active political encouragement and enabling legislation, the military is spearheading Egypt’s transition into a new phase of state-led capitalism that recreates major aspects of public ownership or control of the economy even while partnering with private domestic and foreign capital and claiming faithfulness to the free market line of Western governments and international lenders. Senior EAF officers already believe that their managerial skills and inherent superiority to civilians position them uniquely to lead economic growth and modernization. However, the record of the past six years instead suggests that the more likely outcome will be growing disruption of markets and adverse impacts on the private sector, rising (if still mainly hidden) opportunity costs for the economy as a whole, and an increasing military appetite for profit-making and policy-setting.

For now, the bonanza of economic opportunity that opened up after 2013 has sharply enhanced the military’s gate-keeping role and rent-seeking activities. The most important consequence has been the increasingly central role Sisi has assigned to the defense establishment to manage a massive surge in government-funded megaprojects, concentrating on construction of public infrastructure and housing. But military agencies have also expanded aggressively in a widening range of other economic activities and sectors: intervening in domestic supply chains and import markets, for example, and foraying into lucrative sectors such as mobile telephones and internet provision, media broadcasting and production, and quarrying and mining. Even if the initial post-2013 surge in massive construction projects continues to abate, the military is highly unlikely to relinquish other economic footholds it has acquired. At the very least, it will double down on the zones of special economic interest it has carved out, intensifying the siloing and fragmentation of the broader economy.

Officially, the military seeks greater efficiency, whether by generating higher revenue and reducing costs through improved efficiency and punctuality, or by curtailing losses due to corruption and waste. Novel coordination between EAF agencies and the AMA since the end of 2015 may actually have contributed to achieving these goals in relation to the public works they undertake or manage on behalf of the government, though possibly without reducing cronyism and profiteering on the big volume of smaller subcontracts of which large projects are often composed. The assignment of a widening range of tasks to the MOD and other military agencies has moreover acted as a fulcrum for growing integration between different parts of the military economy. But it has also prompted growing fears of direct competition with the private sector, while heating up rent-seeking competition and realignment between disparate military interest groups and their counterparts in the security agencies, state bureaucracy, and private sector. Thus the military economy becomes entrenched without increasing productivity or growing the rest of the economy.

Politics, Profit, and Predation

Assessments of the motivations, implications, and even extent of the military’s accelerated economic activism since 2013 have varied. Political scientist Zeinab Abul-Magd and journalists Mohamed Hosni and Osama as-Sayyad, for example, perceive a dominant predatory purpose behind what appears to be a coordinated capture of resources and opportunities.1 But analyst Abdul-Fattah Barayez argues, conversely, that the military is doing more than merely “use its political privileges to make money and easy profits.” Rather, in his view, the defense establishment seeks to legitimize the Sisi administration and underpin the new political status quo by investing heavily in “national economic recovery plans (however poorly conceived these plans may be).” Driving these is “the need both to attract foreign capital and to appeal to middle-income groups, a politically significant constituency for Sisi.”2

There is truth in both views, as developments in the military economy appear to be driven by multiple logics. The president’s overarching wish to demonstrate his administration’s credibility to foreign governments and international markets explains the urgency with which he has launched high-visibility megaprojects. Generating growth and jobs is also an important objective, as is suppressing price rises in key commodities and services to mitigate the effects of reducing food and energy subsidies on low-income groups. But this requires capital, which explains Sisi’s drive both to increase revenue and to make savings by containing the corruption that pervades much of the public and private sector. A paradoxical consequence has been to heat up the military economy, whether because of competition and duplication of effort between military agencies or to ever greater rent-seeking and competition among special interest groups, including informal officer networks, in response to the emphasis on state-led initiatives and public funding.

The president’s overarching wish to demonstrate his administration’s credibility to foreign governments and international markets explains the urgency with which he has launched high-visibility megaprojects.

Sisi’s public statements present a clear rationale that only the EAF can spearhead this effort. He relies on it to shore up what he has frankly described as a “pseudo-state” lacking respect for institutions and the law and to compensate for the visible incapacity of the government and its ministries and other civilian agencies to deliver critical public works and services at reasonable cost.3 There is an objective basis for this perception: by one account the Egyptian state’s “core capacities” declined by half between 2011 and 2014.4 Furthermore, it is evident that once Sisi trusts a military or affiliated agency to get the job done, he relies on it to deliver additional tasks beyond its normal remit. In November 2018, for example, he instructed the Suez Canal Authority (SCA) to take part in developing the Arish port in northern Sinai and in clearing the full length of the Nile River navigation channel from Aswan to the Nile delta.5

But although this overarching logic has some coherence, it generates contradictory dynamics and consequences at lower levels. Most importantly, by drawing scarce capital away from other parts of the economy—rather than increasing Egypt’s overall finances—megaprojects and new commercial schemes have accelerated competitive rent-seeking. This can be inferred from apparent realignments between specific military economic actors and private businesses or other interest groups (represented in the internal security services, media, and parliament). Newly empowered military contenders have moreover dislodged previous rent-holders, replacing favored business partners or supplanting incumbent EAF retirees in certain sectors. Lower-level actors implementing the overarching approach pursued by Sisi and the military establishment have naturally adapted to it dynamically, seizing opportunities for profiteering and predation. From his perspective, their competition may also serve a coup-proofing function, which he complements by frequently reshuffling senior EAF commands.

By drawing scarce capital away from other parts of the economy—rather than increasing Egypt’s overall finances—megaprojects and new commercial schemes have accelerated competitive rent-seeking.

These various logics are symbiotic rather than synergistic, feeding on each other rather than adding to an economic sum that is greater than its constituent parts. They appear to do as much to shape and direct the military economy as does the strategic leadership that some assume exists. Certainly, the evidence suggests extensive coordination and consultation between different officials and agencies, reflected for example in the rotation of EAF officers between bureaucratic and economic assignments. And the MOD’s efforts to enter higher-value economic sectors could not take place without command-level commitment of military funds and enabling legislation. But while individuals such as Minister of State for Military Production Mohamed al-Assar, Head of the MOD Financial Authority Major General Mohamed Amin Nasr, and Director of the EAF Engineering Authority Major General Kamel al-Wazir (who was appointed Minister of Transport in March 2019) are highly influential, they do not orchestrate the military economy as a whole.6 Rather, they are among numerous defense officials, military agencies, and officer networks and cliques responding to presidential directives. Collectively, their responses constitute the military economy; but because it is siloed into parallel lines of communication and loyalty it lacks policy coherence and generates contradictory and self-defeating outcomes.

The Big Push

The succession of megaprojects since Sisi assumed the presidency in 2014 is emblematic of the drive to demonstrate the credibility of the post-2013 administration. Sisi gave a sense of the scale of investment by stating in June 2016 that the cost of “national projects” in the preceding two years had exceeded EP1 trillion; Prime Minister Mostafa Madbouly stated in December 2018 that this figure had risen to EP1.56 trillion spent on completing 8,278 projects in 2014–2018 (roughly $87 billion at the 2018 exchange rate).7 More detailed breakdowns provided by senior civilian and military officials suggest a considerable increase in average annual investment in public infrastructure when compared to the last decade of the Mubarak era (see Table 1). But these figures also show that infrastructure did not, in fact, consume the bulk of public investments, which averaged around EP312 billion annually in this period, suggesting that housing probably accounted for the lion’s share. Nonetheless, pride of place has been taken by grandiose, high-profile megaprojects, demonstrating the edifice complex that Sisi shares with several of his predecessors.8

The most grandiose megaproject is Sisi’s plan to build an entirely new administrative capital for Egypt, to be managed by the EAF. Other edifice projects include the Suez Canal expansion, relaunch of the Sheikh Mohammed bin Zayed “new urban community,” and construction of three new “smart” cities (so-called because they use digital technology to improve energy efficiency) and at least four conventional desert cities. As these examples show, the Sisi administration remains as doggedly attached as all its predecessors since 1952 to a top-down, state-led development model and as resistant to alternative approaches proposed by the private sector, independent experts, and international agencies. The haste with which the administration dusted off and implemented the plans for expansion of the Suez Canal, which the Mubarak administration had shelved at least twice, dramatically demonstrated that attachment.

The Second Suez Canal

In August 2014, three months after his election as president, Sisi assigned to the EAF management of a project to construct a 37-kilometer (23-mile) bypass parallel to the Suez Canal and widen the existing canal along nearly the same length to allow two-way shipping. Former Navy commander Admiral Mohab Mamish had promoted the canal expansion heavily since becoming head of the Suez Canal Authority in August 2012. The project benefited the MOD and favored private sector companies, though its benefit to the national economy was dubious. Sisi’s demand that it be completed within one year rather than the three years it was estimated to require compelled the MOD to hire two foreign consortiums to undertake the dredging at a cost of over $2 billion, contributing to more than doubling the initial price tag of $4 billion to $8.5 billion.10

But as Sisi and EAF commanders regularly reminded domestic audiences, the entire cost was to be raised from Egyptian sources: government bonds worth EP64 billion were sold in a mere two weeks, to approximately 1.1 million Egyptian investors.11 Banking on nationalism proved costly. The expansion project was launched on the assumption that the Suez Canal would double earnings from transit fees to $13.5 billion by 2023, but these have actually declined due to the long-term downward trend in global trade and the availability of cheaper alternative routes.12 The SCA, which borrowed a total of $1.4 billion Egyptian banks toward the cost of digging the canal expansion, bore financial responsibility, rather than the state treasury, and was lumbered with EP7.7 billion in annual interest payments.13 It fell into arrears from late 2017, compelling the Ministry of Finance to step in by paying off $600 million in overdue loan repayments in March 2019, leaving the SCA to pay another $300 million it owed foreign banks operating in Egypt.14 The lack of return on investment moreover underlined the fact that the canal expansion had absorbed around EP32 billion of domestic capital deposited in banks, which could have been invested in other sectors of the economy.15

The Suez Canal project nonetheless increased MOD earnings from management fees. It contracted the bulk of the work to 112 Egyptian companies, many of which had previously worked with the ministry or had other military connections, such as Dar al-Handasah, in which the MOD is believed to be a silent partner.16 Some contractors were completely unknown, not appearing in the business register and even lacking websites, let alone possessing the heavy plant and track record to undertake excavation work, suggesting they were front companies set up with the knowledge of the MOD—possibly by EAF officers or their close relatives, as investigate journalists Hosni and Sayyad claim—purely to win lucrative subcontracts or to profit from selling them on.17 SCA head Mamish claimed that a consortium selected by “an impartial French company” had won the expansion contract, whose terms had been approved by World Bank experts, but this obscured the fact that the MOD subsequently awarded the work contracts by direct order.18

“The Most Important Economic Project in Egypt”

The canal expansion was moreover only the first phase of a broader plan to turn an area of 76,000 square kilometers (29,000 square miles)—encompassing three governorates bordering the canal and including the cities of Port Said, Ismailiya, and Suez—into an international industrial, logistics, and transport hub.19 Ironically, this proposal replicated the Morsi administration’s plans for the canal zone (discussed in Chapter 3), an unsurprising development since both originated in the same concept devised in 2002. Planning to develop the zone resumed in the immediate aftermath of the military takeover in July 2013, with Mamish now calling it “an industrial citadel as well as a maritime passage” and the “most important economic project in Egypt.”20 Reflecting this view, the EAF Engineering Authority started work in August 2015 on a new north–south highway linking the length of the Suez Economic Development Corridor at an estimated cost of EP4 billion.21

Sisi launched the next stage of the new megaproject in November 2015, again closely following the development plan that the MOD had imposed on the Morsi administration in May 2013. Focusing on the area east of Port Said at the northern end of the canal, it envisaged a new seaport, industrial area, logistics hub, and 10,000 housing units, as well as a fish farm and tunnels running under the Suez Canal.22 The area was envisaged as an industrial and logistical hub that would attract some $40 billion in international investment, with then minister of investment Ashraf Salman expecting it eventually to account for one-third of Egypt’s economy.23 By December 2018, Mamish claimed that $30 billion had been invested since 2015 in what he proudly described as a “genius site on the global investment map,” 75 percent of which came from foreign investors led by China.24 (Chinese companies may be attracted by Egypt’s free-trade agreement with the United States, which offers them a means of exporting their goods from qualifying industrial zones to the United States under a “made in Egypt” label.25)

Authoritative statements about the financial worth of projects and investments often confuse contract value with actual disbursement or output.

As always, authoritative statements about the financial worth of projects and investments often confuse contract value with actual disbursement or output. Only seven months after Mamish’s boast, prime minister Madbouly pressed the heads of the SCA’s seven subsidiary companies to “attain profits, and avoid imposing new burdens on the budget of the [Suez Canal] Authority or the state.”26 Previous grand plans for the zone have proved problematic. In 2011, several Mubarak-era cabinet ministers and retired EAF officers—two of whom had headed the Maritime Department of the Ministry of Transport—were accused of gross mismanagement of previous projects launched in Port Said in 2001, resulting in cumulative losses of EP1.75 billion ($295 million). Infrastructure costs for the first phase of the Suez Economic Development Corridor, which is scheduled to end in 2030, are estimated at $15 billion; the second phase is supposed to last until 2050.27 With an expected price-tag of $50–$60 billion, the Port Said megaproject launched in 2015 could generate new white elephant schemes on an even larger scale.28

Assigning a major management role to the MOD is supposed to mitigate such risks. In November 2015, Sisi went a step further by instructing the AMA to team up with the EAF Engineering Authority and the MOD’s Military Technical College in order to review the terms of reference for projects, approve bids, clear administrative hurdles, and monitor expenditure.29 AMA head Major General Mohamed Erfan claimed in May 2017 that a committee of 312 EAF engineers and 221 AMA officers had reviewed 1,705 “national and mega” projects costing EP285 billion undertaken in the preceding fifteen months.30 He later stated that the joint committee had grown to 800 officers—468 from the EAF and 332 from the AMA—divided into 198 subcommittees that had reviewed 2,542 projects by January 2018.31 The significance of these numbers additionally lies in the proportion they represent of AMA personnel. In 2012, then AMA head Major General Mohammed Omar Heibah said it had 420 officers but needed 1,500; a year later he said it had the budget to build up to a staff of 800, though actual strength stood at 430.32

This was potentially a significant shift. If it proves successful, it should help military agencies undertake the huge volume of work and achieve economies of scale, while curbing the scope for profiteering, price-gouging, and outright corruption by officers and private contractors alike. But the emphasis on terms of reference and administrative process are unlikely to impact implementation on the ground, where much of the corruption by site managers or engineers happens. Nonetheless, the continuing opacity of contracts, their award by direct order, and the “strategic” location of the development zone still left the MOD with near-total discretion. In August 2013, a communications officer for the development project had in fact denied the EAF would be involved in the project at all, but a few months later Mamish invoked “national security” as a factor in awarding contracts for work in the zone.33 And favored companies continued to receive contracts for projects implemented by the EAF.

The continuing risk was demonstrated by the General Authority for the Suez Economic Development Corridor, which was established to manage the overall development plan. Ahmed Darwish, a competent civilian, initially led the department, but he was dismissed in April 2017 after being accused of terminating contracts and licenses issued to some of the many canal zone companies that are headed and heavily staffed by EAF retirees, without referring to his deputy, Major General Abdul-Qader Darwish (no relation).34 Mamish took over as head of the new authority, while remaining head of the SCA. The board of directors of the General Authority for the Suez Economic Development Corridor also included an MOD representative and two retired officers—the head of the Port Said Port Authority and the Suez governor—and the head of the EAF Engineering Authority was added in December 2018.35 MOD influence is supplemented by its informal hold over lesser state bodies operating in the zone, such as the Red Sea Ports Authority, also headed by a retired Navy admiral.

The MOD has achieved a complete reversal of fortunes since Morsi’s proposal threatened its economic stake in the Suez Canal zone in 2013. Far from being overshadowed by the new development authority that Morsi had proposed, the SCA—the MOD’s main economic vehicle in the zone—instead extended its effective suzerainty over all development and related public works in the country’s most important economic growth region. This additionally reinforces the MOD’s de facto hold on much of Egypt’s energy sector, since a majority of oil and gas resources and infrastructure lie in or go through the Suez Canal corridor. The potential gains to be made were boosted considerably by the start of production at the massive Zohr offshore gas field at the end of 2017. And even if all public works undertaken as part of these mammoth schemes are completed with minimal corruption or waste, they ensure decades of project management fees for the MOD.

Bright Lights, Big City

Speaking at the highly publicized Egyptian Economic Development Conference in Sharm el-Sheikh in March 2015, then housing minister Mostafa Madbouly announced the launch of what he described as a “giant project,” the construction of a new administrative capital east of Cairo. Presented as a “Smart City [that] will take advantage of the sustainable technologies of today as well as be adaptable to future technologies,” it promises to provide 1.1 million housing units for a population of 5 million, allow the transfer of “the entire state administrative apparatus” (except for some ministries) and foreign embassies from Cairo, and alleviate congestion and overpopulation in the old capital over the next forty years.36

Madbouly moreover claimed that the new capital, which he boasted would compare with New York and Barcelona, would not cost the Egyptian state “a single millim,” as construction would be funded commercially in partnership with the private sector and foreign investors. And yet the government was almost immediately compelled to allocate EP5 billion ($639 million) to the project, which had to borrow an additional EP1 billion in September.37 Estimates of the overall cost fluctuated wildly: the housing minister initially set it at $45 billion over five to seven years, while Mohammed al-Abbar, CEO of the main private contractor involved, doubled the estimate to $80–$90 billion (then EP500 billion) and minister of investment Ashraf Salman extended the anticipated timeline to over twelve years.38 Actual spending on the new capital’s infrastructure reached EP140 billion by March 2019, according to the official spokesperson for the project.39

Fluctuating cost estimates and overruns so early in the project were partly the result of Sisi’s insistence that the first phase of the new capital be completed within two years, by the end of 2018.40 Urgency again influenced his choice of the EAF to manage the project, ensuring it a long-term income stream from management fees, partnerships with major foreign companies, and massive new scope to cement ties with favored subcontractors. These included clan leaders from South Sinai, who are being compensated for their loss of income from tourism due to the EAF’s ongoing counterinsurgency campaign and co-opted into supporting the government.41

Also involved were familiar public business and private sector companies Arab Contractors, Hassan Allam, Taalaat Mostafa Group, Palm Hills, Petrojet, and the Holding Company for Construction and Development.42 Behind the scenes, several of the bigger private companies had balked at investing in the capital, but were intensely pressured to do so.43 Speculators and real estate developers have nonetheless responded to the high political premium placed on the new capital by flocking to it while reducing their investment in previously attractive areas around Cairo, sharply driving up the market value of the MOD’s extensive land holdings between the existing capital and the Red Sea as a consequence. At the same time, the umbrella company set up to manage the new administrative capital project (51 percent owned by the MOD) was granted ownership of government buildings in Cairo that would be vacated following the transfer of ministries and other agencies, granting it prime real estate in central parts of the old capital.44

The new administrative capital demonstrates that the MOD now occupies a position once held by big businessman Osman Ahmed Osman under Nasser and Sadat, who was allowed to run the publicly owned Arab Contractors Company as a quasi-private firm. The MOD is similarly assured of a very long lease of management fees and of construction and follow-on maintenance contracts, and has advance knowledge of new megaprojects, allowing it to orient its activities and investments accordingly. So not only was the MOD ready to start work on the new administrative capital as soon as Sisi had approved the plan in mid-June 2015, but it had already started construction of the connecting road network earlier.45

Another important development was the appearance of a new military economic actor. On November 29, 2015, Sisi issued Presidential Decree 446 amending the powers of the EAF’s Land Projects Agency, which was set up by presidential decree in 1981 to manage the sale of real estate no longer in use by the armed forces. The agency was now authorized to engage in commercial activity and “develop its resources, for which purpose it may form companies in all their guises, whether on its own or jointly with national and foreign capital.”46 Sisi followed up on February 8, 2016, with Presidential Decree 57 instructing the Land Projects Agency, NUCA, and NSPO to form a public limited company to undertake planning, construction, and later development of the administrative capital and Sheikh Mohammed bin Zayed City.

The Administrative Capital Urban Development Company (ACUD) was duly formed under Law 8 of 1997 on Investment Guarantees and Incentives, which was designed to attract foreign investors to Egypt with the offer of tax and customs exemptions and nontax incentives such as reduced energy prices and government subsidization of social security charges for labor. The MOD and NUCA shared ACUD’s startup capital of EP6 billion, although ACUD spokesperson Major General Khaled el-Husseiny revealed in May 2018 that the MOD and Ministry of Housing had injected EP204 billion (approximately $11.4 billion at that time) into the project, leaving the MOD with 51 percent ownership and NUCA (nominally representing the Ministry of Housing) with 49 percent.47 The MOD and NUCA held five and three seats, respectively, on the company’s thirteen-member board.48 Initially a civilian was made nonexecutive chairman, but EAF retiree Major General Ahmed Zaky Abdeen replaced him with full executive powers in August 2017. Presidential Decree 57 additionally allocated a total of 16,645 feddans (over 17,000 acres) around Cairo to the NSPO for construction of the administrative capital, with the value of the land constituting the NSPO’s share of equity in the project.49

A legal framework to govern relations between military and civilian investors has not yet been devised, but being able to use land as commercial equity gives the former permanent leverage over private sector partners.

As the establishment of ACUD showed, by allowing the MOD to use state land as its share of capital in joint ventures, Presidential Decree 57 effectively locked such land into military control to an unprecedented degree. The MOD already controlled use of state land under existing laws, as it repeatedly reminded the public, for example when assuaging fears that foreign companies would acquire national territory under the guise of joint ventures in the Suez Economic Development Corridor and elsewhere. A legal framework to govern relations between military and civilian investors has not yet been devised, but being able to use land as commercial equity gives the former permanent leverage over private sector partners, whether domestic or foreign. This includes limiting recourse to civilian courts in the event of disputes, since military partners are subject only to the jurisdiction of military courts. The same jurisdiction will presumably apply to the Air Force’s al-Qatameyya and Cairo West bases, which were opened to civil aviation in May 2015 in order to serve the new administrative capital and receive traffic overflow from Cairo International Airport.50

Smart Utopias for the Affluent, Desert Cities for Workers

These patterns also apply to the three other smart cities (in addition to the new administrative capital) under construction by the EAF’s Engineering Authority and Megaprojects Department as of early 2019: al-Galalah International City, New Alamein, and New Alexandria. The “smart” label denotes a new marketing approach following the serial failures of the first three generations of desert cities, now with an emphasis on high-end urban projects offering luxury housing and facilities and natural advantages such as beach fronts or elevated views intended to attract upper-middle-class customers and investors. Predictably, it also reflects the central role of information technology, whether in managing infrastructure in the new cities or enabling surveillance of their inhabitants. The new administrative capital will include a separate smart city designed by the MOD’s Information Technology Department for the Ministry of Interior, for example, which will allow the police to monitor the rest of the capital.51

According to Madbouly, the aim of both New Alamein and New Alexandria is to “transform northern coastal areas into residential cities instead of summer resorts that work only one or two months a year.”52 The former has a target population of 4 million, and may be designated as a summer capital.53 Serving this objective, the EAF Engineering Authority is building additional trunk roads—officially labeled “national roads” to distinguish them from other roads—connecting Cairo to the northern coast at Alamein and Dabaa, where the MOD is involved in building a city around Egypt’s nuclear plant project.54 Notably, the New Alamein project received technical assistance from the United Nations Human Settlements Program (UN-Habitat) and funding for demining (paid to the MOD) from the United Nations Development Program and the European Union.55

New East Port Said, conversely, is another “1-million” city designed to attract industry, services, white collar and skilled workers, and youth entrepreneurs.56 The city of New Mansoura that the NUCA is also building in the Nile delta again reflects the corporatist perspective of government and military bureaucrats, in which neighborhoods or entire cities are designated for specific social strata. Boasting a Dubai-style, artificially created palm frond waterfront, it is intended specifically for middle-class families that cannot afford housing in the superior smart cities, along with social housing for lower income groups, with a target population of 1.5 million.57

Al-Galalah International City combines all these functions. Lying at the heart of the emerging special interest zone of the military, it is presented as a “complete and comprehensive city comprising all facilities and governmental and service centers such as hospitals . . . with multilevel residential areas for all classes,” it will eventually boast the King Abdullah University, an Olympic village, and a massive tourist complex.58 The region, which also contains mines and marble quarries, forms a link between the new administrative capital and Ain al-Sukhna, which has emerged since 1998 as a linchpin of multiple military interests, with its deep-sea port, tourist complexes, airport, industrial zone, and NSPO fishery. The industrial zone is moreover touted as part of a grand scheme, along with a “technology valley” in Ismailiya, to generate 1 million direct job opportunities.59 And in late 2015, the EAF Engineering Authority also commenced construction of what it bills as an Egypt-Africa highway paralleling the existing highway from Port Said to the border with Sudan, which will run through al-Galalah and Ain al-Sukhna, along with connecting and lateral roads totaling 3,000 kilometers.

In anticipation of this massive construction surge, the government approved a 100 percent increase in the NUCA budget in February 2015, reaching EP28 billion ($3.68 billion). In stark contrast, the Slum Development Fund was allocated a mere EP500 million, or less than 2 percent as much as the new cities.60 Ignoring the dismal track record of desert and satellite cities, the EAF and NUCA announced planning or construction for four new towns in northern Sinai, with the stated aim of generating development in the region.61 Work also commenced on building New Ismailiya on the east bank of the Suez Canal, which the state information service described as a “multi-service residential city” intended to house the workforce of the Suez Economic Development Corridor and to “realize one of the national security objectives of the reconstruction of Sinai.”62

However, the goal of providing up-market middle-class housing and gated communities clearly drives much of the new urban development. The complex inaugurated by the MOD’s Department of Armed Forces Clubs and Hotels in Alexandria in February 2017, which included a yacht marina, exclusive restaurants, and a skipper training school, exemplified the growing investment in luxury leisure projects.63 Reflecting the true target audience, residences in smart cities have moreover been marketed through a traveling “Egypt Property Show” that has so far targeted Egyptian expatriate communities in Abu Dhabi, Dubai, and London. Organizing the show is Tawasol, the media company established by Falcon Group International that has fronted several acquisitions by Military Intelligence.64 Indeed, during his initial presidential election campaign in 2014 Sisi specifically stated his hope that Egyptians living abroad would provide $120 billion of the $140 billion cost of his grandiose “Map of the Future” plan for effecting “a quantum leap in the Egyptian economy.”65

The increasing involvement of MOD agencies in high-profile educational ventures with international partners further confirms the upward class mobility sought by the EAF senior officer corps. In January 2018, the head of the EAF’s Megaprojects Department said it was overseeing construction of six new “international universities” in the new administrative capital.66 He added that the department was delivering four new universities in other areas—King Salman in South Sinai, al-Galalah in al-Galalah International City, Egypt-Japan University of Science and Technology in Borg al-Arab (Alexandria), and Egypt National Project for Scientific Renaissance in 6 October city—and facilities at nine other universities.67

That the military is consciously positioning itself as part of Egypt’s globalized “new middle class” is also evident in the Badr International School in Salam City, which was built by the MOD and teaches what it describes as a U.S. curriculum. It is overseen by the Third Army, which almost certainly subsidizes the enrollment of the children of its officers, who could not otherwise afford the annual fees of EP20,000–EP40,000.68 This class bias dovetails with social screening to exclude applicants from low-status backgrounds from entering military (and police or judicial) academies—a discriminatory practice known as kashf al-hay’ah that evolved in the Mubarak era and is now used across the board.

The emphasis on creating prime real estate was also reflected in the amendment of NUCA’s mandate in early 2018 to include constructing “new communities” in re-planning zones within existing cities and villages, rather than in desert land.69 A prominent example is the Nile River island of Warraq in the center of Cairo, which was placed under the authority of NUCA in December 2018 with the intention of creating an upmarket neighborhood of high-rise buildings and a marina. This built on a pattern established at least since 2001, when Mubarak awarded Qursaya, another mid-Cairo island, to the MOD, which approved a tourism development there in 2007 and attempted to evict its inhabitants by force in the wake of the July 2013 coup.70 As with other luxury urban redevelopments in Cairo, such as Maspero Triangle, formerly home to 41,000 working class residents, Warraq’s 90,000 inhabitants were told they could receive replacement housing in desert cities.71

Anecdotal evidence indicates that the new luxury high rises remain empty, as they target a social stratum that no longer has the capital to invest. The drive to generate revenue through one of the state’s most important and abundant assets, land, is proving counterproductive even as it triggers competition between military and civilian economic actors to invest even more in real estate ventures. Yet Sisi and the government, with the active aid and abetting of the military, have launched or decreed seventeen new cities and towns since 2016 by one count, although the population of existing new urban communities accounted for only 3.8 percent of Egypt’s total population increase annually.72

Military Social Benevolence and Paternalism

The new cities have been lauded by government media for their “comprehensiveness and breadth, and their spread all over the country.” A glowing survey of new projects in the official information service argued they would contribute “in one way or another to achieving the economic balance, and establishing bases of social justice in its large concept and therefore reducing unemployment and poverty,” and to “re-distribution of the population over a number of new cities in all regions of the Republic, including Sinai and the northern coast and surrounding areas.”73

However, lower-income groups such as the former inhabitants of Maspero Triangle and Warraq Island are not moving to the desert and satellite cities being constructed by NUCA and military agencies. Instead, they relocate to substandard housing unconnected to public services in other parts of Cairo. As urban development expert David Sims notes, virtually all areas that have been designated for the relocation of small industries are in remote zones or new towns that impose heavy transport costs on owners and workers and crowd out more effective industrial policies for boosting employment and manufacturing.74

Ignoring the failure of these top-down approaches to assigning the spatial distribution of social housing and workplaces, the EAF’s Megaprojects Department announced in January 2018 that it was working on 124 projects to build facilities for 424,000 social housing units for rural and Bedouin communities, and on at least two “model villages” for university graduates east and west of the Suez Canal.75 Madbouly estimated total planned investment in megaprojects in Sinai at EP150 billion by late 2017, besides projects tendered by NUCA to build 340,532 “social housing units” (apartments for low-income residents) in twenty-two new cities at a cost of EP37 billion.76 The timetable for attaining these targets was unclear: AMA head Mohamed Erfan claimed that the overall delivery rate had risen from 48,000 housing units annually before 2014 to 81,000 in 2017, and so completion was unlikely for at least a decade. But the latest housing projects were in addition to others already under way, and so were certain to face serious delays.77

While the construction of social housing is certainly needed, it comes as part of an overall approach to urban development that has done little to alter stark socioeconomic realities.

While the construction of social housing is certainly needed, it comes as part of an overall approach to urban development that has done little to alter stark socioeconomic realities: the top 5 percent of landowners owned 57 percent of agricultural land, while the bottom 43 percent owned less than 1 percent in 2015, even when reclaimed areas are taken into account; the number of Egyptians living in abject poverty had risen to 32.5 percent by 2019, at which time illiteracy stood at 25.8 percent.78 The military approach to social and economic development moreover reflects the marked paternalism of the Sisi administration, as is evident from the military’s involvement in his Long Live Egypt Fund. In June 2014, the MOD placed EP1 billion (then $141 million) of the NSPO’s funds at the fund’s disposal; one of its senior officials later revealed that it was kicked off with EP4.7 billion from the military.79

Since then, the military has contributed to projects funded by Long Live Egypt such as providing prevention and treatment of eye impairment at military hospitals, under an EP1 billion grant awarded to the Nour al-Hayat charity.80 In another example of this approach, the EAF chief of staff and minister of military production provided 600,000 food packages as a religious donation to the intended residents of eighteen “development communities” under construction by the EAF Engineering Authority in north and south Sinai in January 2019. The new homes were additionally to be furnished and equipped with electric appliances donated with the help of the Misr al-Kheir charity, another of several programs launched at Sisi’s prompting.81 But the primary objective of this approach is to prevent social protest and political instability, as demonstrated when the EAF offered reduced fares on its own buses following the sharp increase in fuel prices in July 2014, or when it supplied markets with 8 million food boxes at cheap prices following the 48 percent devaluation of the Egyptian pound in November 2016.82

Infrastructural Synergies

Military agencies have inevitably been heavily involved in building associated infrastructure and service facilities for the new cities, significantly expanding both the scale and the scope of their economic activity. This included three new airports: Capital International Airport serving the new administrative capital, Sphinx International serving the 6 October and Sheikh Mohammed bin Zayed Cities and surrounding governorates, and Melleez International Airport at Bir Gifgafa (Rephidim) in Sinai, which is claimed to have a capacity of 1.7 million passengers annually.83 The EAF Engineering Authority advertised Melleez as improving access to the NSPO’s major cement factory and to local marble quarries and agricultural and hunting zones.84 The authority similarly claimed that its work on Highway 6 in Sinai served both a new technology hotspot and the NSPO cement factory at Arish, “which is supposed to increase output in the coming period to seven million tons annually to reduce monopolies and bring down market prices.”85

Military agencies have inevitably been heavily involved in building associated infrastructure and service facilities for the new cities, significantly expanding both the scale and the scope of their economic activity.

Melleez was in fact one of two airports being built by the EAF in Sinai, effectively its economic backyard. The MOD and several other ministries and state agencies commenced planning for an airport at Ras Sedr in late December 2015, which was proposed as a joint venture between the MOD and private investors on a build-operate-transfer basis, with a seventy-year franchise.86 Typically, those lobbying for the airport resembled an EAF roll call: the South Sinai governor, assistant secretary general of the governorate council, head of Ras Sedr City, and assistant director of the Projects Department of South Sinai were all retired EAF major generals.87 Most telling of the military stake, however, was that the terms of reference for the airport contract were issued by Lieutenant General Osama Askar, Commander of East of Canal Forces for Combating Terrorism.88

Water and wastewater infrastructure is another important sector affected by the big push. The government committed to increase capacity by up to 50 percent by early 2018 and awarded the lead role to the National Authority for Potable Water and Sanitary Drainage, which has been headed by a retired EAF major general since 2011. Previously NAPWASD had “a reputation for delays and cost overruns, low quality delivery and limited transparency” and was relatively inactive. But in mid-2016 it claimed to have received nearly $1 billion in World Bank and European Union loans for planned new projects.89 Other major assignments followed, including development of infrastructure for the new administrative capital, and the authority’s budget rose from $562 million in 2015–2016 to $999 million (EP8.87 billion) the following year.90

These projects also notably benefited the military directly. As a consultancy study in 2011 noted, the MOD and MOMP are large consumers of water and active in constructing and operating water and wastewater treatment plants, both for their own use and as general contractors to the civilian sector.91 Their role has increased exponentially with the massive construction surge since 2013. The EAF Engineering Authority has undertaken projects to build canals and tunnels to transfer irrigation and drinking water under the Suez Canal and its secondary branch, to farms on the eastern bank and to 100,000 feddans of the projected 420,000-feddan land reclamation scheme in Sinai.92 It issued the tender for water desalination plants that will provide 150,000 cubic meters a day for al-Galalah International City it is constructing at elevations of 700–1,200 meters above the Suez Gulf, at a total cost of $500 million. The authority also undertook work to supply the mammoth new NSPO fishery in northern Sinai with the massive volume of fresh water it will require.93

The most important instance of synergy, however, is arguably the massive complex centered on the Red Sea port of Ain al-Sukhna that has emerged in the course of the past two decades. Launched in mid-1999 with a twenty-five-year concession from the government and operational since 2002, al-Sukhna was the first fully private port in Egypt (and still only one of two). In 2004, the MOD completed a new highway connecting Cairo to Ain al-Sukhna, and started to lease land on which the EAF barracks and other facilities stood to tourist developers. The MOD has made the area a nodal point of infrastructure, industry, trade, tourism, and upper-middle-class housing since 2013, and a magnet for foreign investment and public-private partnerships. Its deepwater facility now serves the new administrative capital as well as Cairo and, as importantly, land reclamation, agricultural, and mining ventures owned or managed by the military in inland governorates such as New Valley, which the military has connected with publicly funded highways. There is a similar synergy between the Abu Tartour mining complex, which is undergoing major expansion, and the NSPO, which owns the Nasr phosphate factory in Ain al-Sukhna and has a 20 percent share in the joint stock Egyptian Marketing Company for Phosphate and Fertilizers that was established in October 2018 as the exclusive commercial agent of all phosphate producers in Egypt.94

In part, Ain al-Sukhna reflects the approach adopted by the government of grouping related industries and services in geographical clusters to enhance synergies and net value. The MOD was involved in the creation of the first cluster in Robiky, moving leather tanneries from central Cairo and setting up a production and maintenance facility (to be built by the MOMP).95

Ain al-Sukhna is moreover developing as a linchpin for infrastructure and economic sectors in which the military also has vested interests along the Red Sea littoral stretching over 1,000 kilometers (675 miles) from the southern end of the Suez Canal to the border with Sudan. Unsurprisingly, EAF retirees head all governorates and relevant government agencies such as port and development authorities within the region. Ain al-Sukhna’s proximity to the South Suez Economic Zone ties it to shipping and services through all ports up to Port Said at the northern end of the Suez Canal and to Arish on the northern Sinai coast. This includes reception, production, storage, and export facilities for petroleum, natural gas, and their derivatives; in 2018 alone contracts worth $10.9 billion were signed for what is expected to be the largest naphtha cracker plant in the world, the Tahrir Petrochemical Complex.96 The military is meanwhile also investing in expanding ports farther south such as Safaga, partly on land leased by the MOD, which will allow exports from ventures in the New Valley.97 This and other developments are part of a government plan adopted in 2016 for the “golden triangle” in southern Egypt, another major focus for the military, with the aim of building up mining, tourism, and other economic interests on the Red Sea coast.98

Ain al-Sukhna and its region also reflect the Sisi administration’s social and political alliances. Al-Galalah International City is developing as a military-managed extension of the upper-middle-class resorts and residences of Ain al-Sukhna, along with significant investment in manufacturing and extractive industry. And in August 2019, Sisi transferred 75,000 feddans around the major tourist destination of Hurghada to the MOD, along with control of forty-seven Red Sea islands used by tour operators to offer snorkeling and safaris, which he declared “strategic zones of military importance.”99 Ain al-Sukhna also embodies the alliance with the UAE: Dubai Ports World acquired a 90 percent stake in the port in 2008, and Emirati capital is invested in the Tahrir Petrochemical Complex.100

Haste Makes Waste

Sisi’s deployment of the military to undertake megaprojects imparted a tangible sense of urgency that was backed by repeated promises to deliver on accelerated schedules. The EAF’s Megaprojects Department started designing New Ismailiya in January 2014 with the aim of delivering a city for 314,000 people by the end of 2016, for example, while in May 2015 Sisi promised that 1 million feddans of land would be reclaimed in “no longer than two years,” a target that remained far from completion as 2020 approached. These statements were accompanied by inflated claims of how many jobs could be generated—New Ismailiya would supposedly employ 80,000 people permanently and another 2 million indirectly—and of record delivery times—such as the boast that three new international airports “were completed in no more than a year,” instead of the scheduled two years.101

To deliver swift results, the MOD had to hire inexperienced companies and agencies. State-owned petroleum services company Petrojet found itself building housing and roads in the New East Port Said city project, for example, as well as digging tunnels under the Suez Canal.102 It lacked the labor and relevant expertise, but subcontracted smaller companies, assigning quotas of housing units or different stretches of road to each, which they built under military supervision.103 The EAF Megaprojects Department did the same, employing thirty private sector firms to work on 219 kilometers of Highway 6 in Sinai.104

Yet the politically motivated drive to show swift results also raised costs: to attract sufficient workers to al-Galalah, for example, the EAF Engineering Authority offered above-average wages. It offset other costs by persuading some firms to undertake work for free, such as digging tunnels under the Suez Canal, which they accepted in the hope of securing future contracts.105 Even when they were paid, these firms may have received below-market rates—in contrast to foreign contractors—and made to absorb the losses. But the MOD was also willing to incur costs itself for the sake of speedy delivery where it was expedient; for example, the EAF Engineering Authority financed U.S. company General Electric to expedite installation of twelve turbines in Asiut and West Damietta rather than wait for state funding.106

As egregious is the extraordinary draw of virtually all military-run megaprojects on Egypt’s water resources. These are under severe pressure, with the country already below the threshold of water poverty and heading toward absolute water scarcity by 2025. Yet the new administrative capital is expected to consume over 500 million cubic meters of water annually on completion; plans to siphon some 200,000 cubic meters of water a day from nearby satellite cities again demonstrate how political considerations trump cost-benefit analysis and resource scarcity.107

As this case shows, the military tends to respond to a challenge with simple engineering fixes that do not resolve the main problem. Indeed they may aggravate it: desalination of seawater to supply new cities and megaprojects on the northern Mediterranean shore or around Ain al-Sukhna on the Red Sea is fuel-intensive. So is pumping water from the Nile or underground aquifers to higher terrain or through cross-country canals or tunnels under the Suez Canal to water-hungry land reclamation schemes and agricultural projects. Wastewater canals moreover carry toxic industrial and agricultural waste, affecting downstream areas such as Kafr el-Sheikh, home to a significant part of Egypt’s fish stocks.108 And yet the NSPO is rapidly expanding fish farming there and in northern Sinai to increase food supply (discussed below), magnifying both the demand for fresh water and the generation of waste that flows back into canals and the sea. These projects are moreover concentrated in areas most threatened by the potential rise of sea levels due to global warming, putting them at risk.

Indeed, environmental impacts of military projects generally are impossible to verify or evaluate since any technical studies or documentation relating to them are kept under wraps. For example, the NSPO’s major farming projects in East Owaynat draw on a deep groundwater aquifer believed to be nonrenewable.109 No less importantly, the NSPO has launched a major new fishery in Lake Burullus, which is one of several Nile delta lakes found in 2008 to have concentrations of heavy metals above internationally permissible limits including iron, zinc, copper, manganese, cadmium, and lead. These lakes had moreover shrunk due to land reclamation, conversion into fish farms, and overgrowth of aquatic vegetation and suffered from industrial and agricultural discharge as well as petrol combustion from boats and automobiles, resulting in an overall contraction of their share of national output of fish from 40 percent to 12 percent.110 The government has moreover warned about rising salinity in the Delta, where most of the country’s rice is grown, and restricted rice cultivation in response, and yet the NSPO’s new fisheries are major consumers of fresh water.111

In theory, the NSPO or other military agencies could actually be applying the international standards and best practices they (and civilian counterparts) claim for virtually everything they do. But none of the many such pronouncements reviewed for this report mention specific environmental safety measures or initiatives, suggesting that the greater premium is placed on maximizing output at minimum cost. Nor has the military identified countering environmental damage among its priorities in the civilian domain; Egypt was identified in June 2019 as the biggest contributor to mismanaged plastic waste in the entire Mediterranean basin, accounting for 42.5 percent of the 6.6 million ton total, and generally mismanages 93 percent of its plastic waste streams, to take just one example of a sector in which the NSPO and military factories are active.112

Similarly, according to the Egyptian cabinet’s own Information and Decision Support Center, around 80 percent of the entire country’s annual industrial effluent was being discharged untreated into the Nile and its waterways in 2007.113 And yet the EAF intervened to suppress local inhabitants protesting the potential environmental effects of expanding a (civilian) petrochemical plant in Damietta in November 2011, for example, while protesters campaigning against three similar factories that were inaugurated in Fayoum a month later were told nothing could be done since the factories were owned by the MOMP.114

As a study published by the International Food Policy Research Institute in 2018 noted of megaprojects launched in Egypt over the past several decades, they have been “large-scale, with broad visions (usually accompanied with political dimensions), multiple objectives, and extremely high costs. Their impact is often large enough to be irreversible.”115 The continuous expansion of military-managed construction and industrial projects and of its new extractive projects for heavy metals (such as the NSPO’s black sand factories discussed below) in heavily inhabited and agricultural areas has the potential to raise the environmental costs very considerably, precisely because they escape external monitoring and control despite relating to civilian purposes.

A Strategic Gold Rush

Much of the military’s expanding economic role since 2013 has taken place in geographical zones long designated as strategic—the Suez Canal and its development corridor, Sinai and the rest of the Red Sea coast, and other border areas—and in sectors deemed of strategic value to the national interest and well-being—such as social housing and land reclamation. The military is deemed—by itself as much as by others—the only state institution capable of spearheading national projects on this scale and of providing the capital needed—especially human, and occasionally financial. But the military has also exploited its effective suzerainty over strategic zones to intensify its commercial exploitation and pursue spin-off activities that lie in, or pass through, those zones. In doing so, the military has displaced civilian economic actors—both public and private—in sectors such as the fish industry, transport infrastructure and operations, and agribusiness and imports.

Utilitarian Zoning

As noted in Chapter 3, Sisi gave an early demonstration of the commercial utility of strategic zoning by designating the southern Shalateen border area a military zone in November 2014, enabling the MOD and NSPO to develop extensive mining and quarrying interests (including gold prospecting).116 He again demonstrated the utility with Presidential Decree 233 of 2016, which designated twenty-one national roads as “strategic zones of military importance.”117 Several of these roads connected areas of military economic activity, such as the land reclamation project in Farafra in the New Valley and New East Port Said. But many connected popular tourist resorts and main cargo and passenger terminals in Sinai (Port Said to Sharm al-Sheikh, Nuweibe, and Taba), the Western Desert (Siwa and the Western Desert Oases), and the Cairo–Red Sea hub (at Ain al-Sukhna). The EAF patrols these highways, dealing with traffic accidents, levying fines, and referring cases to military courts.118 In May 2017, Major General Sayyed al-Shahed, assistant for financial affairs to the minister of health, additionally revealed that Sisi had entrusted the EAF with setting up first-responder posts on highways.119

Decree 233 moreover placed land to a depth of 2 kilometers on either side of national roads under the control of the MOD, effectively granting it a significant commercial franchise. Cabling for internet and telecommunications, a sector the MOD has sought to enter aggressively, will almost certainly be laid in this strip of land. Indeed Egypt Telecom, which owns this sector’s infrastructure and retains a de facto monopoly in it, had previously announced that it would replace the outdated copper cable network with fiber optic cables with the target of reaching 4 million customers by the end of 2015.120 Furthermore, under its existing powers, the MOD may confer its standard exemptions for income tax, property tax, and customs duties to companies it awards franchises in these highway zones. The prospective diversion of revenue from the public purse compounds the allocation of usage tolls on the highways to the MOD. And by instructing the EAF to remove encroachments on state land encompassed by all roads designated as “national,” not just “strategic,” Presidential Decree 233 gave the military effective control of the intercity network as a whole.121

Member of Parliament Mohamed Anwar Sadat was one of the few to openly question Presidential Decree 233, arguing in a public release that any income from the highways should accrue to the treasury as they had been built with state funds in order to help economic development.122 Others were more compliant. Hisham Ibrahim, professor of finance and investment at Cairo University, countered that the EAF was entitled to benefit commercially “since the roads were built on its land and it has the right to compensation.”123 But subsequent decrees consolidated the MOD’s advantage. On February 28, 2017, Presidential Decree 77 transferred 60,000 feddans of arable land in the “green belt” belonging to 6 October city to the Sheikh Mohammed bin Zayed City. This turned agricultural land into high-value residential real estate in areas adjacent to the Rod al-Farag road complex, which connects central Cairo to outlying suburbs and satellite cities, and to nearby highways now under MOD control.124 Similarly, Presidential Decree 101 issued on the same day awarded the MOD 14,596 feddans in the vicinity of the Dabaa nuclear complex on the northern coast, again connecting ultimately to the Rod al-Farag road complex, which has emerged as a magnet for overinvestment of public funds.125

Member of Parliament Mohamed Anwar Sadat was one of the few to openly argue that any income from the highways should accrue to the treasury as they had been built with state funds. Others were more compliant.

In parallel, the MOD planned expansions in more traditional areas of activity. A prime example was the launch of a project to build an “airport city” near Cairo International Airport in August 2014, shortly after the announcement of the second Suez Canal scheme. Designed as a mixed services, tourism, entertainment, and sports complex with an initial cost varyingly estimated at between EP60 billion and EP100 billion, those responsible claimed it would generate 100,000–120,000 jobs and EP422 billion in income between its intended completion date in 2020 and 2040.126 In this instance, retired EAF major generals were the prime movers, including two successive heads of the Cairo International Airport, the head of the Civil Aviation Authority, and the Giza governor.

Displacement 1: Feeding Egypt Fish

The MOD also consolidated its interests in the Sinai Peninsula, the neighboring Suez Canal zone, and the Nile delta, most notably with a major foray into fish production. In January 2015, the NSPO announced the establishment of a new venture, the National Company for Fishery and Aquaculture; its initial cost was announced as EP1 billion (then $100 million), revised to EP1.7 billion by its inauguration in November 2017.127 Heading it was Major General Hamdy Badeen, the former head of Military Police who had been accused of ordering excessive violence against demonstrators and coerced virginity tests on female detainees in 2011.128

The establishment of the National Company for Fishery and Aquaculture revealed two significant trends. First, in contrast to other sectors involving public funding and economic output in which military-affiliated agencies partner or share sectors with civilian government counterparts, the new company has almost completely displaced the General Authority for Fish Resources Development (part of the Ministry of Agriculture), which saw its budget slashed by 75 percent cumulatively in 2014–2016.129 By fall 2015, the NSPO’s National Company for Fishery and Aquaculture had assumed management of fisheries in Lakes Bardawil, Burullus, and Nasser and in feeder basins along 120 kilometers of the Suez Canal expansion.130 These areas had previously come under the general authority, which lost control of an additional 123,500 feddans of land for fish farming in New East Port Said, Berket Ghalioun (which produces 200,000 tons of fish annually), and Ain al-Sukhna by August 2016, on Sisi’s orders.131 In February 2017, Sisi assigned Badeen to oversee all government agencies involved in increasing fish production from Lake Nasser and to set up four new plants to process crocodile products.132 And in November the president inaugurated a “fishing industrial city” at Lake Ghalioun, comprising factories for fish feed (“the largest in the Middle East”), ice, and foam containers, and he approved plans to build similar facilities at Lake Bardawil.133

Second, the National Company for Fishery and Aquaculture has become an additional means of inserting the MOD into the country’s external trade links. In fact, the Egyptian military had been accused of illegal seabed trawling in Yemeni territorial waters in the Red Sea as early as 2003, using civilian boats. But now it sought to enter this market formally. According to Central Bank Governor Tarek Amer, Egypt imported fish worth $800 million in 2016; press reports on the company’s activities frequently emphasized the aim of increasing local output to meet domestic demand.134 Underlining the importance attached to the enterprise, the Kafr el-Sheikh and Port Said governors—both retired EAF major generals—toured the new fish farms with Badeen in April and September 2016.135

Badeen’s announcement in August that the company had obtained its first export license for a joint fish farming venture with a Chinese company also revealed a clear profit motive.136 This was followed in November by a joint venture with a Cypriot company that aimed to produce 50,000 tons of fish annually for export to Russian, French, and British markets. Significantly, the National Company for Fishery and Aquaculture hoped to access foreign loans of €400 million through its Cypriot partner, confirming the pattern of using joint ventures as means for securing funding and technology.137 Paradoxically, Badeen visited Mauritania to secure fishing rights for Egyptian vessels in March 2017 and visited Eritrea the following month to sign deals to import fish, whether in a bid to secure Egypt’s needs until local output had built up or to capture the price differential between imported Red Sea and Atlantic fish and exported Egyptian fish.138 Either way, this was another instance of the MOD inserting itself into the country’s supply chains.

Displacement 2: Cities of Marble, Salt, and Black Sand

By a twist of fate, much of Egypt’s mineral wealth lies in the extensive strategic zones controlled by its military. The MOD’s foray into gold prospecting in the Shalateen border area with Sudan was noted in Chapter 3, but since 2013 the ministry has also established quasi-monopolies over marble quarrying, salt production, and commercial exploitation of sand. The NSPO has been its principal vehicle for these ventures, which mainly concentrate in the Sinai Peninsula and Lake Burullus in the Nile delta.

In mid-2014, the NSPO’s Mining Sector launched Misr Sinai for Industrial Development and Investment, with which it then agreed to cooperate in building a cement factory and marble and glass production facilities in central Sinai.139 The MOD reportedly held a 51 percent share in the new company, which declared a startup capital of EP3 billion; the remaining 49 percent stake was supposedly held by thirty-six Sinai clan elders.140 In January 2016, the NSPO and Misr Sinai announced they would construct a “marble and salt city” comprising ten marble factories and five salt factories for an investment of EP1.2 billion, which they claimed would employ 13,0000 people within the year.141 But in May, the NSPO transformed Misr Sinai into a new subsidiary, the National Company for Marble and Granite, which announced plans to construct the “largest” marble complex in the Middle East and North Africa at a cost of EP800 million.142

Egypt was exporting 68 percent of its marble output in raw form and losing the opportunity to add value, according to NSPO Director General Major General Mostafa Amin. To rectify this, the NSPO was ready to muscle aside civilian counterparts and competitors, whether in the public or private sector. The fact that it now had the authority to award exploration and exploitation licenses to companies in the mining sector revealed the extent to which it had displaced government agencies in controlling natural resources in strategic zones.143 But it went significantly further in April 2017, when it informed stunned members of the Federation of Egyptian Industries’ Chamber of Quarries and Marble Industry that it was expanding its capacity from three to seven marble processing facilities with the target of supplying 80 percent of Egypt’s total production.144 By August 2018, the NSPO marble and granite complex in Beni Suef had seven factories, with five more planned in other rich quarrying areas under MOD control in Sinai, Ain al-Sukhna, and Aswan by mid-2019.145

Potentially more profitable still is the NSPO’s parallel investment in the extraction of heavy metals and rare earth elements from alluvial sand deposits in Lake Burullus on the Nile delta coast. In mid-2016, it established Egyptian Black Sand as a public limited company, in which it holds a 61 percent share, with the stated aim of meeting local needs and acquiring a 30 percent share in export markets.146 The stakes are high: the NSPO controls the sole black sands site in Egypt, with estimated deposits of 250–285 million tons, and expects to produce 3–5 percent of the world’s total supply of titanium and zirconium within the coming decade.147

According to the head of Kafr el-Sheikh Governorate, which is a stakeholder in the Egyptian Black Sand Company, the venture is expected to bring $176 million in annual revenue to the state treasury once in full production.148 Not surprisingly, it has attracted foreign investment: a deal with an Australian extraction company in May 2018 was immediately followed by the formation of a joint Egyptian-Chinese company to build a second extraction plant.149 In January 2019, parliament approved the Egyptian Black Sand Company Agreement Law authorizing it (along with the Nuclear Materials Authority) to explore, extract, and process black sand minerals and derivatives throughout Egypt, effectively granting a largely military-owned company a commercial monopoly.150

Import Chains and Supply Crises

Much of the preceding highlights the growing insertion of military agencies and affiliates into Egypt’s external trade system. Volatility in the supply of basic commodities in domestic markets after 2013, affected by the sharp depreciation of the Egyptian pound against foreign currencies and by the subsequent major shortage of dollars and price inflation in 2015, has provided both stimulus and pretext for the military economy to expand even further into commerce.

Volatility in the supply of basic commodities in domestic markets after 2013 . . . has provided both stimulus and pretext for the military economy to expand even further into commerce.

Meat and Poultry

As noted in previous chapters, much of the military’s external trade activity has clustered around the import, transport, and sale of livestock and meat from neighboring Sudan. This is a major business sector, both due to the size of the Egyptian market and rising proportion of meat in the national diet since the liberalization of imports under Sadat in the 1970s, as well as the presence of large, guaranteed customers like the EAF and the massive state bureaucracy. And because trade with Sudan involves the Nile River, Red Sea coast, and a foreign government with which Egypt has complex political relations—all deemed to affect national security—the MOD and GID are extensively involved behind the scenes in facilitating access and deals.

Private sector companies undertake much if not all of the real commercial investment, such as building slaughterhouses and growing fodder in Sudan, while the MOD and affiliated agencies mainly engage in procurement and retail. But the two are interwoven. A prominent example is the familiar private partner of the MOD, Qalaa Holdings, which has invested heavily in trade-related transport. Its Care Marine subsidiary owns two river ports in Sudan, from which it delivers industrial and agricultural products to Egypt.151 In 2010, the retired EAF major general who heads Qalaa’s Holding Company for Transport Means, which owns four subsidiaries geared toward trade with southern Egypt and Sudan, negotiated the purchase of three ports on the southern Nile River from the General Authority for River Transport, headed by a fellow EAF retiree.152

Worsening economic and social conditions helped justify the trend. In August 2016, Sisi commended the MOD for “reducing prices through the relevant departments that import livestock, frozen meat and poultry without middle men and at lower prices.”153 The NSPO was already publicly involved in importing meat for the domestic market, while the MOD supply department probably did the same under the guise of procurement for the armed forces.154 Indeed, the MOD already had secondary income streams from building a network of slaughterhouses offering meat at discounted prices to the public, while the GID has set up front companies trading in meat.155 The appointment in September 2016 of the former head of the EAF’s Logistics and Provision Authority, Major General Mohammed Ali al-Sheikh Mseilhi, as minister of supply and internal trade probably helped integrate military agencies and the GID into the civilian supply system even further.

Consequences for domestic markets have been mixed, at best. Earlier in 2016, the NSPO and other military agencies had exploited the sudden removal of all tariffs on imported chicken and chicken parts to dump large quantities of imported chicken in domestic markets, undercutting private businesses.156 Responding to their protests, the Ministry of Supply and Internal Trade stated that it had asked “sovereign bodies,” which it later identified as MOD importing agencies, to import chicken to meet local demand ahead of Ramadan in June 2017.157 But the imports resulted in a glut that drove prices down for the rest of the year, triggering further protests from the Egyptian Poultry Producers Association.158

The manner in which military agencies had come to the country’s rescue revealed the complex interplay of politics and business and the contradictory considerations shaping trade and economic policy. It also generated lucrative opportunities for individual EAF officers and middlemen to profit. Writing in early 2017, investigative journalists Mohamed Hosni and Osama as-Sayyad claimed that private importers of poultry and meat found their shipments delayed in ports on health and safety grounds unless they paid off the relevant EAF officers, or else brought the shipments in at military-controlled ports in Sinai without going through customs.159

Entering the Wheat System

A crisis in wheat supply in 2016 offered the most graphic demonstration of the military’s growing role in economic management and the resulting new dynamics. The sector, which is governed by a plethora of government agencies and complex rules, was already characterized by extensive penetration by retired officers, multifaceted corruption, and mafia-like competition between rival cliques, revolving around imports, domestic procurement and supply, and storage.160 The stakes are very high. Egypt is the world’s largest importer of wheat, bringing in 12 million tons in the twelve months up to July 2017 and 12.5 million tons up to July 2018, representing about 4 percent of the country’s total imports.161 To encourage Egyptian farmers to plant wheat, the government has always procured it at a fixed price far above international prices: $84 more per ton for domestically produced wheat in 2014, and $180 more in 2016.162 The government is also the only major purchaser of domestic wheat, as well as operating all large-scale inland storage and much of storage capacity at main seaports.

A crisis in wheat supply in 2016 offered the most graphic demonstration of the military’s growing role in economic management and the resulting new dynamics.

Not surprisingly, large volumes of flour and wheat are believed to be resold on the black market, as a review of the sector by the Food and Agricultural Organization of the United Nations noted in 2015.163 A parliamentary investigation in 2016 confirmed that officials and private wheat traders mixed cheaper imported grain with subsidized domestic grain and pocketed the difference in price.164 This illicit practice may have contributed to the dramatic shift in the ratio of imported to domestically produced wheat, from 1:1 in 2002 to 3:1 by 2017.165 Reuters correspondent Eric Knecht reportedly estimated that this practice “accounted for roughly 2 million tonnes of supplies bought by the government last year [2015], equating to a loss of nearly 2 billion Egyptian pounds” (then $225 million).166 To cover up, officials falsified quantities in storage and exaggerated losses due to rot, rodents, and theft. The parliamentary investigators said they had uncovered EP119 million in fraud in the first two storage facilities they inspected; a separate press report claimed that “gifts” (ikramiyyah) of up to EP700,000 had been given by heads of storage companies to senior officials in the General Organization for Exports and Imports Control and in the Ministries of Supply, Agriculture, and Health.167

With so much at stake, the MOD has played an increasingly visible and assertive role in the sector since 2013. Initially, retired officers were mainly involved. In February 2014, the new minister of supply and internal trade Major General (police) Mohamed Abu-Shadi dismissed the entire board of directors of the Holding Company for Storage and Silos (the second-most important state body undertaking import and storage of wheat) for failing to achieve targets and incurring losses of EP89 million, and appointed an EAF major general as the new company head.168 Abu-Shadi was himself removed in a cabinet reshuffle shortly thereafter, reportedly after his chef de cabinet was arrested for corruption; the dismissed holding company head was restored to his post and yet another EAF major general was made his deputy.169 This unfolded against the backdrop of a pledge by the UAE to fund construction of 25 wheat silos with a storage capacity of 1.5 million tons; in March it complained that a tender to build four silos had been inflated by 300 percent and demanded that it be reissued and monitored by the MOD.170 Whether the holding company or the Ministry of Investment, which owned it, was at fault was unclear, but in June the AOI was contracted to build the remaining silos funded by the UAE, and the General Company for Silos and Storage (a subsidiary of the Holding Company for Silos and Storage headed by a former EAF major general), was selected to operate them.171

Matters came to a head in mid-2016, when the Ministry of Supply and Internal Trade declared that its procurement of domestic wheat had jumped to nearly 5 million tons, from an annual average of 3.0–3.5 million tons over the past decade.172 Ostensibly, suspicion that the data had been manipulated to commit massive fraud is what prompted parliament to launch an investigation; Reuters cited claims that over 2 million tons of the total may have existed only on paper.173 But parliamentary involvement also suggested that competing security and military interest groups and the parliamentary factions representing them were taking their rivalry into the open. In any case, the MOD was immediately involved. Unusually, a senior EAF officer accompanied the parliamentary inspection, whether because retired officers were implicated or signaling the MOD’s wish to enter the sector more directly;174 the officer, Major General Sharif Adel Basili, had previously overseen construction of UAE-funded silos on behalf of the EAF Engineering Authority, and following the investigation was appointed to head the Holding Company for Silos and Storage, part of the Ministry of Supply.175

As significantly, the MOD became directly involved in fixing Egypt’s antiquated storage system, which relies extensively on shounas—open-air holding bays exposed to contamination, humidity, and birds and rodents—leading to the loss of anywhere between 10 and 50 percent of locally produced wheat.176 In fact, the EAF claimed to have already built forty-seven modern grain silos from 2013 to 2015 (with UAE funding), and in March 2014 assumed management of the construction of four more.177 In late July 2016, it took over negotiations with U.S. food security company Blumberg Grain to construct 300 warehouses capable of storing 2.35 million tons of grain, at a cost of $250 million (to be funded by a U.S. government grant).178 The company had originally entered the Egyptian market in mid-2014, reportedly agreeing with Sisi to have 164 new storage facilities in place by the 2015 harvest season, in a deal worth $350 million.179 Blumberg Grain expected to handle Egypt’s entire crop by 2018, by which time the project would reduce waste by $550 million a year and cut imports, saving another $8 billion over five years in hard currency.180

But these hopes ran aground due to the resistance of the Ministry of Supply, whose companies owned the silos and barns in which all wheat procured by the state had to be stored.181 Blumberg Grain finally installed ninety-three steel storage sheds with a total capacity of 744,000 tons in time for the 2016 harvest—a year late—but even these could not be brought into use because the ministry’s Holding Company for Silos and Storage failed to provide them with electricity, in another example of bureaucratic pushback by other interest groups in the wheat sector.182 The MOD’s decision to deal directly with Blumberg Grain in late July brought the behind-the-scenes struggle into the open. When Blumberg warned that it would exit the Egyptian market unless second phase construction was brought under the supervision of the EAF Engineering Authority, the Ministry of Supply refused to continue the project.183 Then supply minister Khaled Hanafi resigned abruptly a few weeks later, and was replaced in September by Mseilhi.184

The EAF had won, partially. The government brought procurement prices for domestic wheat in line with imported wheat in January 2017, reducing the scope for profiteering from price differentials, but a final solution to the storage problem was deferred.185 The EAF’s Engineering Authority now had charge of determining storage solutions, along with the government’s Agricultural Research Center and the MOMP, which was contracted in October 2017 to supply and maintain machinery and surveillance equipment at storage facilities.186 Blumberg Grain finally completed the first phase of the project with the delivery of 105 silos in August, and announced it was moving into a second phase of building 300 modernized shounas at a cost of $150 million, in a joint venture with the EAF Engineering Authority, which was at least partly funded by the Long Live Egypt Fund.187 But Blumberg Grain and its U.S. subcontractors revealed in August 2018 that the Egyptian government had failed to make contract payments over the previous twenty-two months and had yet to reimburse the costs of air-freighting three buildings and systems to Egypt in 2015. Worse, they claimed that Egyptian government officials had “illegally provided their design and engineering documents to companies from other countries,” including Russia.188

Multiplying Supply Crises

The wheat crisis revealed the MOD’s growing assertiveness in economic affairs, but also that it remained constrained by other powerful bureaucratic and private interests. Whether its main intention was to muscle in on a lucrative sector or to resolve a critical flaw in public supply and finances, intervention also offered it a commercial advantage.189 The health sector, conversely, demonstrates the result of convergence between the military and civilian counterparts, albeit mixing the goal of resolving a supply problem and achieving savings with attaining commercial gain.

The wheat crisis revealed the MOD’s growing assertiveness in economic affairs, but also that it remained constrained by other powerful bureaucratic and private interests.

As Egypt researcher Ayman Emam has detailed, the MOD won the exclusive right from the Ministry of Health in 2016 to procure medical supplies—including imports—on behalf of the government in what was known as the “Berlin deals.”190 This may have built on Presidential Decree 82 of 2013 that relieved the ministry completely of observing the previous thresholds for contracts awarded by direct order when purchasing medical supplies of a “strategic nature,” which were taken to include vaccines, intravenous drips, medications, and even baby formula. Originating in a trade negotiation involving various commercial suppliers held in the German capital in 2015, the Berlin deals gave rise to a Unified Procurement Committee headed by an EAF major general and including several others, which expanded its remit from catering to military medical facilities to the public health system a year later. Making the MOD especially attractive as a middleman is the exemption of its imports from customs duties and its ability to clear or circumvent government red tape. Its power to award contracts by direct order offers an additional advantage by enabling health agencies to expedite spending down their remaining budgets at the end of the fiscal year—contracts that can no longer be challenged by third parties under legislation passed in 2014.

The military’s formal entry into the civilian health sector was spearheaded by responding to yet another supply crisis, this time of baby formula. On September 20, 2015, the state-owned Egyptian Company for Trade in Pharmaceuticals took out a paid newspaper ad to complain that the Ministry of Health had transferred its license to import and distribute medicines to a “sovereign body,” and appealed to Sisi to step in to protect the jobs of its 5,000 employees. The MOD confirmed it had replaced the company in response to price-gouging by private dealers, and announced the resumption of baby formula sales at half the recent price.191 Assar next stated that the military would produce formula locally, but instead it merely took over importing it. Critics noted that it could still make a profit despite selling at a discount as it did not pay customs duties on imports, and claimed that the Ministry of Health had stopped open bidding for baby formula import licenses, effectively granting the MOD a monopoly for the whole market. Whatever the truth of these claims, baby formula was being sold at a 28 percent markup by February 2019, at which time it was being marketed under the label of the Long Live Egypt Fund.192

The MOD expanded its involvement in medical imports and production rapidly over the following year as various media and officials sensationalized alleged shortages of medical supplies as further crises. The first of these followed a report by a regime-affiliated media outlet in January 2016 that accused private sector “mafias” and “emperors” of inflating the price of stents used in heart surgery and “suitcase traders” of importing low-quality stents that often proved defective.193 This was a prelude for the announcement in June by the EAF that it would unify procurement of stents, valves, and catheters in a single international auction, displacing the three firms alleged to control the entire market and supplying all public hospitals at significantly reduced cost in the new financial year starting on July 1.194 On August 26, the assistant for financial affairs to the minister of health, a retired EAF major general, confirmed that all imports of medical supplies and equipment would henceforth be undertaken by the EAF Medical Services Department and the national armaments authority alone, and that this would pass 50 percent savings on to local clients and patients.195

The trend continued with the announcement in October by the Holding Company for Drips and Vaccines that it had signed an EP140 million contract with the MOMP and the Arab Company for Drug Industry and Medical Appliances to produce medical solvents. Despite claiming this was aimed at filling a shortfall in domestic supply, it announced that it would also export them.196 At the same time, Sisi instructed the EAF to produce blood derivative drugs used to treat cancer and liver disease by intravenous infusion on behalf of the Egyptian Company for Blood Transport Services, again due to a supposed shortage in the Egyptian market.197 According to an anonymous member of the Chamber of Engineering Industries, the MOD was even importing cotton wool for hospitals. Whether in response to the supposed crisis in medical supplies or to enter a profitable sector, the National Authority for Military Production sought government permission to establish the Egyptian National Company for Pharmaceuticals as a public limited company in January 2017.198

In the meantime, the MOD Medical Services Department won a growing number of exclusive contracts from state-run universities to supply their needs, and by September 2016 had increased the number of military hospitals and clinics serving the general public by 50 percent, from thirty in 2013 to forty-five, reportedly providing healthcare to 500,000 people.199 The EAF Engineering Authority also claimed that it had been contracted to build nearly forty civilian hospitals and medical centers across Egypt in 2013–2015, that it had built five new hospitals and upgraded three, and that it had started work on an additional fifty-four medical facilities in Upper Egypt in 2018.200

Military agencies have competed to enter this lucrative field. The NSPO has marketed medical and maintenance services aggressively, and also offered financing arrangements, for commissions ranging from 8 to 15 percent.201 In July 2017, for example, it won contracts to provide comprehensive service packages for hospitals worth $600 million from the Arab Investors Union and to build a specialist hospital for Benha University.202 The MOMP also joined, receiving a contract to oversee construction of three hospitals for the lawyers’ association in October 2018.203 Two months later, the General Authority for Social Insurance contracted with the EAF’s Medial Services Department to allow its members to receive healthcare at any military hospital.204 And in February 2019, the MOMP approached Emirati investors with a plan to set up a medical waste disposal plant.205

Reaching for Low-Hanging Fruit

These interventions in import and domestic supply chains inevitably generated complaints that the military was crowding out the private sector. In some instances, reliance on military agencies seemed unavoidable given the deepening decrepitude of state institutions and incompetence or corruption (or both) of the civilian bureaucracy. But the MOD’s pursuit of a major stake in lucrative sectors such as mobile telephony and internet service provision after 2013 indicated it was also actively going after “low-hanging fruit,” as an industry insider termed it.206 Predictably, this is presented in the name of national security, but along with the expanding role of military actors in the religious sector—real estate endowments, organizing pilgrimage, and related tourism—it similarly mixes the drive to generate revenue at Sisi’s behest with commercial opportunism.

The MOD’s pursuit of a major stake in lucrative sectors such as mobile telephony and internet service provision after 2013 indicated it was also actively going after “low-hanging fruit.”

The Mobile Market

For many years, the MOD’s known involvement in telecommunications was limited to membership of the board of directors of Egypt Telecom, which was converted into a joint stock company in 1998, replacing the Arabic Republic of Egypt National Telecommunications Organization. Egypt Telecom retained its monopoly on fixed-line telephones, but two (later three) private sector firms held the mobile market.207 Starting then, if not earlier, every incoming chief of staff of the EAF Signal Corps automatically joined the board of Egypt Telecom. EAF retirees have additionally sat on the board or held other senior posts in the company.208 With that exception, however, Financial Times journalists Charles Clover and Roula Khalaf were correct in stating in 2011 that “the military has no presence in some of the commanding heights of the Egyptian economy, such as telecoms or oil and natural gas.”209

This held true until the 2013 military takeover, but the MOD then made a direct bid to assume this commanding height. In October 2014, then minister of communications and information technology Atef Helmy confirmed that the MOD would play a central part in forming a National Company for Communications Infrastructure, along with other state agencies and communications operators. He denied that the MOD would have a controlling stake, but this was later publicly reversed by Gamal el-Sadat, CEO of mobile operator Etisalat Egypt.210 A press report at the time set the MOD’s share at EP255 million, or 51 percent of a total startup capital of EP500 million (approximately $70 million at the time). An EAF major general would head the company board, which would additionally include representatives of the Ministry of Interior and individual security agencies, and military companies would lay fiber optic cables nationwide, over which the MOD would have oversight and monitoring rights.211 Under the new structure, the three existing mobile companies (Orange, Vodafone, and Etisalat) would end their rental contracts with Egypt Telecom worth EP1 billion annually, and instead pay EP300 million each to the new infrastructure company.212

In May 2015, the Ministries of Defense, Communications and Information Technology, Finance, Electricity, and Transport were reported to be finalizing plans to invest EP3.8 billion in the venture, which one study estimated would generate overall revenue of EP30 billion over fifteen years.213 Egypt Telecom had already objected to the scheme in mid-2014, in part because it sought to enter the market as a mobile operator.214 Resistance from various quarters built up amid unconfirmed reports that the MOD was demanding 60 percent of the proposed company’s capital.215 In June 2015, the Ministry of Communications and Information Technology pulled out, announcing that Egypt Telecom would instead rent out its infrastructure (at a discount) and receive a 4G mobile license of its own.

This presented a commercial opportunity for the MOD. In order to become an operator, Egypt Telecom would have had to sell its 45 percent stake in Vodafone Egypt; according to one well-placed industry insider the intended buyer was the MOD, potentially making it a partner of Vodafone UK, which held the remaining 55 percent share.216 But its competitors objected strenuously. In August 2016, the government allowed Egypt Telecom to set up its own mobile company without first divesting from Vodafone Egypt, promising to resolve the potential conflict of interest in the future.217 The MOD is not known to have acquired shares, but it retained the power to determine the 4G frequencies to be given out to mobile operators.218

Making Religion Pay

Where formal military economic actors lead, the officers’ republic follows. But in contrast to the communications or media markets, which require major institutional investments, EAF retirees have sought commercial opportunity in the religious sector, which offers more modest, but dependable, returns. This is enabled by their penetration of transport authorities and hubs, especially in strategic zones through which tourism and pilgrimage routes pass, and of government tourism authorities and companies. Field research confirms that government rest houses used by Muslim pilgrims en route to Mecca are run by EAF officers. So, too, are ports such as Hurdaga, which is the point of departure for many of Egypt’s “labor pilgrims,” workers who obtain a combined pilgrimage and three-month work visa to Saudi Arabia.219

Military agencies have also become formally involved in the religious sector. Starting in 2017, the government took control of all pilgrimage visas issued in Egypt, and then assigned the EAF to manage the lottery through which the visas are awarded. The AOI has tapped into the religious tourism market by providing equipped tents for Christian pilgrims taking the Ministry of Tourism’s “Flight Into Egypt” trail, which follows the journey made by the holy family’s flight from Sinai to Asyut in Upper Egypt.220 Only accredited tourist agencies may organize pilgrimages, enabling the EAF retirees who head the General Authority for Tourism and several public sector tourism companies to steer contracts in their direction.

The greater financial opportunity, however, lies in religious endowments (awqaf). Retired EAF officers head the General Authority for Religious Endowments, which manages urban real estate, farmland, and commercial enterprises estimated to be worth EP70 billion ($3.9–$4.6 billion) in 2016.221 (The general authority nominally comes under the Ministry for Religious Endowments, but is effectively autonomous thanks to the influence of the EAF retirees heading it.) As part of Sisi’s drive to increase state revenue, which one expert optimistically claimed could be taken to EP10–EP15 billion annually, he assigned the EAF Engineering Authority to join a new committee tasked with inventorying and recovering endowment assets and increasing their economic return. In what has become a familiar pattern, the MOMP next stepped in, concluding a formal agreement with the Ministry of Religious Endowments to help it upgrade its assets and investments, improve efficiency in its ventures, and train its personnel in June 2018.222

Military involvement is equally long-standing in the closely related sectors of culture and education—especially in relation to historical buildings and antiquities. Political scientist Robert Springborg, who worked in Egypt in the 1970s, notes that the military, security, and presidency all had “at least indirect pecuniary interests in preserving the nation’s cultural heritage, typically in the form of competing companies controlled by their colleagues or favourites.”223 Decades later, researchers Jeremy Hodge and Nizar Manek observed that the Supreme Council of Antiquities, which hired at least eighty-eight retired major generals under Mubarak, was notorious for awarding contracts at inflated values to military-affiliated companies. The focus on prime government-owned real estate is mirrored in the education sector where, as in the cases of tourism and religious endowments, EAF retirees have continuously headed the General Authority for Education Buildings.224

Military Interest Groups

The award of commercial franchises to multiple military (and security) agencies serves Sisi’s main purposes of securing their political buy-in and attempting to solve Egypt’s massive economic problems. But his approach has the paradoxical consequences of enabling and legitimizing the narrow pursuit of profits by interest groups within these sectors, strengthening them while further impeding the development of unified, coherent responses by the institutions to which they belong. These interests have evolved since 2013, but they often overlap or at least do not come into direct conflict so long as the commercial and economic opportunities continue to expand.

Sisi’s dependency on governing coalition partners extends even to relations with the EAF. As analyst Marina Ottaway noted, for example, the start of construction of the new administrative capital was delayed by the MOD’s refusal to cede land for free, because its “interest in maximizing returns from the land it controlled trumped al-Sisi’s interest in seeing the new capital built, suggesting al-Sisi does not have total control over the military’s affairs.”225 He has the means to manipulate the various military interest groups and play them off against each other, but must also award them economic resources and opportunities. This most directly affects formal military agencies, but also extends indirectly to the advantage of competing officer networks.

Duplication

Competition among formal military agencies has so far mainly taken the form of inefficient duplication of specific economic activities. This became especially visible in May 2015, when the MOMP established its own contracting and construction conglomerate, MP for Engineering Projects, Consultancy, and Public Procurement. The new company is supposed to undertake projects on behalf of the EAF and civilian and commercial customers in a wide range of fields: urban development, housing, real estate investment, sports facilities, schools, hospitals, factories, hotels and tourist resorts, and public relations and advertising.226 Launched with startup capital of EP100 million (then $13.1 million) and completely owned by the National Authority for Military Production, MP was moreover authorized to enter into mergers, acquisition, and partnerships with domestic and foreign companies.227 The MOMP had previously undertaken projects of the same kinds as those by various EAF departments or the NSPO, such as its contracts in 2011–2012 to develop sanitation and a wholesale market in Giza.228 But MP duplicated a broader range of activities than the MOMP had previously, with the ambition to do so on a much larger scale; indeed Assar claimed it had racked up EP15 billion worth of contracts by June 2019.229 Indeed, with such a premium on contracting, even the MOD’s General Services Agency, which normally runs military commissaries, has taken on construction contracts despite being a minor economic actor and lacking relevant capacity.

Much the same kind of duplication has emerged in other fields. In 2016, for example, the NSPO established the National Company for Protective Agriculture to expand greenhouse cultivation in cooperation with Spanish and Chinese companies. But the AOI and MOMP have also launched similar ventures of their own, working with South Korean, Dutch, and Belarusian partners. Since 2016 the NSPO has also established a new subsidiary for petroleum exploration and development (a field in which numerous state companies already operate), a second for mining and mineral extraction (parallel to the MOD’s own Mining Sector), and an elevator company (parallel to the elevator company formed jointly by the MOMP and a Saudi firm). Similarly, the NSPO reported that it had supplied pharmacies with 23 million units of baby formula in response to the sudden shortage in 2017, even though the MOMP had already announced it was taking measures to meet the need through imports or taking on production itself.230

These military agencies are responding in similar ways to common circumstances: they all seek entry to economic sectors that offer secure returns, and pursue foreign partnerships as a source of know-how and capital. They moreover situate their behavior in both instances within Sisi’s agenda of increasing income and cementing political alliances with foreign countries. But they do so separately from each other, as private businesses competing in an open market would do, suggesting that they perceive their interests as distinct rather than mutual and revealing the poor integration of this sector of the military economy. As significantly, the marked political empowerment of the military since 2013 has enabled both formal and informal military actors to displace rival agencies and networks, including those affiliated to the GID. Hosni and Sayyad claimed in early 2017, for example, that the MOMP was replacing two GID companies that previously had exclusive contracts for supplying public hospitals, in favor of its own new pharmaceutical company and of other companies with informal military affiliations—including one run by the brother-in-law of retired Admiral Mohab Mamish, head of the Suez Canal Authority.231

The same is true of other sectors such as food supply to civilian markets, which has increased in direct response to Sisi’s political directives. The sale of bread, meat, poultry, and other commodities through the MOD’s network of bakeries, butchers and slaughterhouses, and outlets of its Sun supermarket chain has already been described. But the NSPO also expanded its own sales capacity by 400 percent in 2016, and announced that it was doing its bit to combat inflation by providing 250 tons of meat and commodities daily at reduced prices through 700 outlets nationwide.232 The NSPO director general later claimed that it had provided local markets in 2017 with 300,000 tons of meat, poultry, cooking oil, and other consumables (possibly including imports) through its own and Ministry of Supply outlets, as well as 210,000 tons of locally grown wheat.233 The GID reportedly also used its trading companies to increase food supply to markets, as did the Ministry of Interior, which in late 2015 started selling meat, poultry, pulses, and the like through its own newly established outlets (labeled Aman)—starting with 120 and building up to a claimed 1,000 by mid-2018.234

Behind each of these supply chains lay the separate procurement agencies or companies of each agency or ministry, raising the possibility that each was competing for market share while purportedly pursuing the president’s political objective. But even if competition was not a primary factor, the fact that a significant portion of the food sold by these various agencies consisted of cheap imports raises serious doubts about the economic sense and financial sustainability of their approach. As one commentator observed in an op-ed sarcastically titled “The Security Authorities’ Potatoes,” it could neither guarantee that prices would stay low nor provide more than passing relief for low-income families in the absence of a comprehensive system to monitor markets and coordinate production.235

Clash of Networks

The absence of firm rules means that conflicts of interest are often resolved through direct contestation. This has been especially evident in the responses by both EAF retiree networks and well-connected civilian lobbies based in the state bureaucracy who pushed back when military agencies aggressively moved into import and supply markets, threatening to dislodge them. At the same time, the military has been the main beneficiary of the dissolution of the crony networks tied to Mubarak until 2011; the general reconfiguration of networks of privilege within the civilian bureaucracy has enabled the military to displace, if not altogether eclipse, powerful competitors such as the GID, which has been compelled to cede ground across the board, including in the all-important oil and gas sectors that had previously been an almost exclusive GID domain.

The absence of firm rules means that conflicts of interest are often resolved through direct contestation.

An intense dispute affecting wheat supply in late 2015 demonstrates the dynamic. The central state buyer of wheat, the General Authority for Supply Commodities, changed the allowable level of the common fungus ergot in imported wheat to zero, rather than the global photo-sanitary standard of 0.05 percent. This was a classic case of using quality controls as a nontariff barrier to direct markets toward narrowly targeted enterprises or away from their competitors.236 It disrupted imports from France and Canada, but more serious was the suspension of a huge deal to import 6 million tons of Russian wheat, straining diplomatic relations and prompting a (short-lived) Russian ban on importing Egyptian citrus in September 2016.237 One of the largest affected shipments was eventually sent back to Russia after sitting in Damietta Port for two months, according to researcher Shana Marshall. The shipment had belonged to Medsoft, an energetic privately owned company whose expansion into river transport made it a competitor to military-affiliated interests in the sector.238

Notably, the board of the General Authority for Supply Commodities included several EAF retirees who headed the General Company for Silos and Storage; Holding Company for Food Industries, Mills, and Threshers; Holding Company for Food Industry; and Holding Company for Ground and Maritime Transport.239 The dismissal of the head of the General Authority for Supply Commodities in March 2016 and then of his successor in January 2017 reinforced the common perception that rivalry between powerful traders and bureaucrats was driving the wheat crisis.240

In January the government also transferred most of the responsibility for inspecting wheat and other agricultural imports to the General Organization for Exports and Imports Control, which has been headed continuously by EAF retirees since at least 2005.241 The dispute then moved to the state’s administrative court, which restored the jurisdiction of the General Authority for Supply Commodities in mid-June 2017.242 Further reshuffles in the sector saw the departure of the heads of boards of ten subsidiaries of the Holding Company for Food Industries in March–April 2018—mostly connected with mills and bakeries—followed closely by the arrest of the retired EAF major general heading the company and several senior officials on corruption charges in May.243

Hosni and Sayyad explained the entire episode as an instance of competition between rival import “mafias” associated with the EAF on the one hand, or with the GID, three import companies fronting for it, and allied state bureaucrats on the other hand. These rivalries moreover played out visibly in the People’s Assembly, as the launch of a parliamentary investigation into the wheat crisis in July 2016 demonstrated. Virtually all members of parliament elected in late 2015 were government loyalists, but as investigative reporter and human rights activist Hossam Bahgat has chronicled, various interest groups coalesced around competing factions backed on one side by the National Security Agency, which comes under the Ministry of Interior, and on the other by the General Intelligence Directorate and Military Intelligence.244

Conclusion: Heating Up

The accelerating expansion of the military economy since 2013 reveals greater levels of strategic planning, direction, and coordination within the military economy. This is evident in the choice of economic sectors and geographic regions to invest in and, albeit to a lesser extent, in the differentiated approach to partnering with big, medium, and small private sector enterprises. But that does not mean that these expansion and investment decisions make good economic sense or are compatible with each other. As importantly, with expansion has come a redoubling of predatory and rentier behavior, and with it new forms of competition and displacement that are disrupting the informal arrangements and understandings that previously regulated the distribution of income-making sinecures. These trends are overheating the military economy and starting to crowd the private sector more directly, increasing friction and transaction costs. As importantly, they signal incipient, strategic shifts within the governing coalition and the wider political economy of Egypt.

The accelerating expansion of the military economy since 2013 reveals greater levels of strategic planning, direction, and coordination within the military economy.

Mapping the military’s economic activity since 2013 shows that its extent, patterns, and financial returns vary considerably from one sector to another. The military clearly derives the main part by far of its income from its control of land and from public contracts, where it has very considerable leverage—and where the private sector is most held hostage. Access to this captive market compensates for the military’s weakness in most areas of manufacturing, where it has proven unable to overcome its inability to add value and cannot compete with the private sector in any genuinely open market. But its ability to assert an overt role in external trade, whether as supplier or as broker, bears on private competitors in other, no less significant ways. And since 2016 it has also been expanding from its traditional focus on largely nontradable goods to include tradables in protected sectors related to its public works such as cement and steel, with the private sector bearing the brunt of market disruption.

The military is also visibly positioning itself to gain a significant share of the production and sale of natural resources, even though this, too, must be shared with private companies (both domestic and foreign) that retain leverage and market share through their command of needed technology and access to export markets. The presence of important foreign companies in lucrative sectors such as mobile telephony compels the military to be circumspect, but it already appears to compensate by extracting income from the domestic companies entering these and other sectors.

These variations reflect differing opportunity structures and costs and shape competition between interest groups, military and otherwise. The manner in which both formal and informal military actors have responded since 2013 is reinforcing tendencies to siloing and fragmentation in the economy, and contributing to increasingly divergent outcomes for market participants. What enables all this is a combination of the “delegative authoritarianism” constructed by the Sisi administration—in which participants in the governing coalition are constrained only by power balances between them, with minimal constitutional or legal limitations—and the permissive, when not actively supportive, attitude of foreign governments and international agencies eager to respond to the message tirelessly repeated by the Sisi administration that Egypt is “open for business.”

The military is on a trajectory that, if left unchecked, will institutionalize its involvement in the civilian economy, transforming the senior officer corps from being merely a special interest group (albeit a large and powerful one) into a market-setter, if not a policymaker. But because it functions through a mix of old-fashioned étatist notions about the economy and crony public-private partnerships, on one hand, and on the other hand wields the power to disregard market dynamics and signals (except when needed to accommodate contending members of the governing coalition and state bureaucracy), its more likely impact will be to impart a greater sense of inconsistency and unpredictability to the course of the Egyptian economy.

Notes

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