On November 29, 2015, Egyptian President Abdel Fattah el-Sisi amended the powers of the Armed Forces 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 latest amendment now additionally empowers the agency to engage in commercial activity “to 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.”
At first glance, Sisi’s Presidential Decree 446 of 2015 on military land and proceeds merely confirms and continues the expansionary trend of the Egyptian military’s involvement in the civilian economy since he took power in July 2013. Over the past two years, the Egyptian Armed Forces (EAF) have taken on the management role for a number of mega-projects, including construction of a second Suez Canal and plans for over one million new housing units and a new administrative capital. This is part of a broad trend that, according to a study by Shana Marshall published by the Carnegie Middle East Center in April 2015, has made the EAF “the primary gatekeeper for the Egyptian economy” since 2013, if not earlier.
Competition Among Military-Linked Companies
However, it also underscores the lack of an overall approach for the formal military economy. Authorizing the EAF Land Projects Agency to engage in commercial activity and enter into joint ventures with both public and private Egyptian companies as well as foreign companies will place the agency in direct competition with a sizeable array of military-owned companies and EAF bodies that are already similarly engaged. These include many of the several dozen factories and companies owned by the Ministry of Defense Production, the Arab Organization for Industrialization (established in 1975), the National Service Projects Organization (established in 1979) which is a subsidiary of the Ministry of Defense, and the army’s own engineering, water, and other departments. A number of these companies have been involved in joint ventures, including with foreign companies, for years; indeed, since the late 1970s in the case of the Arab Organization for Industrialization.
Certainly, Presidential Decree 446 is all about commercial motive. Furthermore, it is almost certainly geared towards enabling the Egyptian military to capitalize on the massive investments that Sisi hopes to generate—particularly from the Gulf—by securing contracts from the planned mega-projects involving real estate: housing and a proposed new administrative capital. But more significant still is the widening scope of works planned by the Suez Canal Area Development Project or within its area of operations, such as the port expansion and new residential facilities and housing east of Port Said announced by Sisi on November 27. All land in this zone is designated as a “strategic interest” and therefore under the exclusive control of the EAF, granting it immense influence over the award of contracts and effective usufruct.
At the same time, the ambiguous logic behind Presidential Decree 446 suggests that the expansion of the military’s economic activity is accompanied by a diversification not only of the civilian sectors in which it operates, but also of the military interest groups associated with each. The thousands of retired senior officers embedded in government ministries and authorities, local government bodies, and the very sizeable state-owned holding companies and their subsidiaries—constituting what I have described elsewhere as the “officers’ republic”—have acquired extensive vested interests. But they are also often grouped into distinct clusters and competing networks based on their graduating classes at the military academy, different branches in the EAF, and cliques formed during their active service.
Fostering Rival Military Cliques?
The emergence of distinct, competing military interest groups may now be extending to the formal military economic enterprises. Presidential Decree 446 suggests that their officer-managers—and associated networks both inside the officer corps and outside the EAF—are acting as business rivals and lobbying separately to take advantage of the major commercial opportunities being generated by Sisi’s emphasis on mega-projects. Enabling this is undeniably within the president’s gift, but it will only lead to an increasingly dysfunctional competition between these different military economic interest groups and networks, while complicating the business environment within which both domestic and foreign private capital operates.
The scope for complication and conflict is highlighted by the lack of new, parallel decrees clarifying and reconciling the legal status and regulatory framework of military and civilian businesses. For example, a decree issued in May 2011 by Marshall Mohammed Hussein Tantawi in his capacity as head of the Supreme Council of the Armed Forces and effectively president of the republic, exempted EAF officers entirely from trial for illicit gains before civilian courts, even after retirement. Later legislative decrees limited the scope for bringing charges against company directors or for challenging the award of government contracts.
Taken together, these and other rulings and measures shield EAF officers and retirees engaged in business, whether on behalf of any of the formally registered military economic bodies or of private companies and individuals, from subjection to the same rules and penalties as their civilian counterparts(whether Egyptian or foreign).
Clearly, the EAF and the entities comprising the formal military economy are the most privileged institutional actors in Egypt’s evolving political economy. Other main beneficiaries are the informal networks of military and security officers and retirees embedded in the state apparatus and parts of the private sector, followed by favored businessmen who enter into commercial partnerships or consortia with military-backed companies, and the political operators and media managers or owners who provide the new regime with its public face and who are often partnered with officers financially or through kinship and marriage.
In theory, the entry of the Armed Forces Land Projects Agency as yet another commercial actor could signal a significant policy shift by Sisi and the EAF, from prioritizing political expediency to generating maximum profit for the military and its various networks—or pursuing both. But a more likely interpretation is that the lack of an overall strategy for Egypt’s economic development is resulting in something akin to a laissez-faire approach within the country’s military economy, enabling multiple military interest groups to pursue their own separate and potentially conflicting agendas.
The long-term effects on Egypt’s business environment, economic development, and domestic politics are difficult to predict with precision, but will almost certainly be adverse.