JANUARY 28, 2016
To keep the armed forces happy, President Sisi is giving them Egypt’s economy.
A year and half since taking office, Egyptian President Abdel Fattah al-Sisi continues to enjoy a broad base of popular support thanks to his zero-tolerance policy on Islamism, his grandiose nationalist development projects, and his tight grip on public discourse. But popular support can be fickle, and unlike Hosni Mubarak, his predecessor in authoritarianism, Sisi doesn’t have a dominant political party to mobilize on his behalf. In fact, he doesn’t have any formal political institutions behind him at all; his abrupt rise to power through what was essentially a popular military coup never afforded him that opportunity.
While the country’s new parliament has an all-star cast of high-profile Sisi supporters, most ran as independents and have yet to assemble into a reliable, lasting coalition, much less a single party with as much political clout as Mubarak’s National Democratic Party. When the going gets tough,
Sisi can hardly count on this parliament to sway public opinion in his favor.
Sisi can hardly count on this parliament to sway public opinion in his favor. Only one institution has the strength and legacy of popular support to secure his place in office: the Egyptian Armed Forces (EAF).
“Politically, Sisi needs the army,” said Ahmed Abd Rabou, an assistant professor of comparative politics at Cairo University. “He has no political institution. The army is his only source of political legitimacy. It has become a political group in and of itself.” And at this stage, that’s exactly what the EAF wants. They have secured their place as Sisi’s primary constituency. And in return for their loyalty, they’ve made their demand clear: to dominate the Egyptian economy, unfettered by the laws that govern civilians. Sisi has hastened to make it so.
Of Sisi’s 263 presidential decrees since coming into office, 32 pertain directly to the military and security sector, according to the Tahrir Institute for Middle East Policy’s Legislation Tracker project. These include a decree raising military pensions by 10 percent, a decree expanding military courts’ authority to try civilians, and a decree that enabled the defense ministry to establish for-profit security companies. Imagine a Blackwater that the U.S. military not only employs, but profits from.
Less well noticed, however, have been Sisi’s more discreet administrative and economic decrees, such as his November pronouncement regarding the Lands Projects Agency. This military-owned holding company was set up in 1981 to sell off unneeded military real estate to the private sector. Sisi’s decree, however, now gives the agency the power to create its own commercial businesses and develop its assets for profit.
This little holding company, designed to gradually shed the military’s assets over time, now has the capacity to grow, exempt from taxes and any civilian oversight. And the Land Projects Agency is only one of several such military holding companies. There are others, such as the massive Holding Company for Maritime Transport, which were created during the Mubarak era and then handed over to the military. Such companies are now crowding out the private sector in an economy that desperately needs it to grow.
It’s hard to say just how much of Egypt’s economy the armed forces control.
It’s hard to say just how much of Egypt’s economy the armed forces control. Military companies are not required to disclose their earnings and experts’ estimates vary wildly from 5 to 60 percent of total GDP. However the breadth and diversity of the military’s economic empire is no secret. Its National Service Products Organization manufactures and sells everything from cement and fuel to pasta and bottled water, while the Arab Organization for Industrialization manufactures luxury Jeeps, smartphone tablets and solar panels, all for civilian markets. The military’s holding companies also own a wide range of assets: large swathes of lucrative land, civilian coach lines, storage facilities and cargo ships, among others.
Under Mubarak, rather than selling off their assets, these holding companies began using them to acquire government and foreign contracts in shipping, logistics, engineering and construction, among others. Using conscripts as unpaid laborers, they were able to offer below-market rates. This suited the president, who found that doling out such contracts to military officers was a good way to ensure their loyalty.
But Mubarak was hardly dependent on the goodwill of these officers to stay in power; he had the NDP to take care of that. He had created a system that favored the military — but only to a degree that kept the generals on his side during elections. “Mubarak was very smart in regards to the army,” Abd Rabou said. “They were very favored, but they were not a driving political actor. They had their economic empire, but it was all behind the scenes. The NDP was the main political actor.”
That all changed when Mubarak resigned nearly five years ago. Amid great public jubilation, the Supreme Council of the Armed Forces stepped up to oversee Egypt’s transition, and for the first time since 1952, the military enjoyed full authority to dictate the country’s laws and policies. It maintains this authority today through a president that is completely beholden to it.
Under Sisi, the role of the military companies has expanded rapidly.
Under Sisi, the role of the military companies has expanded rapidly. Rather than being simply awarded contracts, they are taking over the management of entire projects. Theoretically, this is intended to encourage foreign investment, promising a simpler, more streamlined process for investors. But this is little more than rhetoric, according to Shana Marshall, associate director and research instructor at George Washington University’s Institute for Middle East Studies.
“There’s this cliché that to attract foreign investment, you have to cut bureaucratic red tape and centralize it in one place,” Marshall said. “The World Bank likes to use that language. So Egypt is playing lip service to the idea of fighting bureaucratic bloat. In this case, it just centralizes corruption.”
These aren’t insignificant projects, either. The $9 billion New Suez Canalexpansion, for example, was entirely overseen by the EAF. With a navy admiral at the helm of the Suez Canal Authority, the military was able to ensure that dredging contracts were awarded first to its own engineering firms and next, to firms belonging to its political allies. “This effort enables the military to keep tight control over the project[s], to give contracts to Gulf companies and to function like a jobs program for enlisted men,” Marshall said.
Sisi’s next megaproject will attempt to create 1.5 million acres of farmable land in the desert. Experts have raised doubts whether enough laborers will be willing to leave their ancestral homes along the Nile to work the empty desert, not to mention whether the land will have sufficient groundwater to keep the new fields irrigated. But Sisi isn’t looking that far ahead. His eyes are on the short term — namely on the host of military and Gulf contracts to be awarded on the scheme, and on the foreign investment to be earned.
That’s why he favors such megaprojects: because they can keep his most important constituency, the military, rich and happy. Package them in a thick layer of patriotism, and he can even boost his approval rating along the way.
“The true test of his political skill will come when the money dries up,” Marshall said.
“The true test of his political skill will come when the money dries up,” Marshall said. And that’s precisely what’s happening. With oil prices at 10-year lows, Saudi Arabia is being forced to reevaluate its domestic spending, raising fuel prices for its citizens by 50 percent in early January. Since 2013, Egypt has enjoyed over $12 billion in aid from Saudi Arabia, largely in the form of investments, with pledges of billions more to come. But the more Saudi Arabia’s oil revenues recede, the more tenuous those pledges become.
“There’s no fighting over scraps right now,” Marshall said. “The tension will come down the road when the Gulf money is gone.”
When that day comes, Sisi will have to reckon with the fact that his megaprojects have done little to solve the economic woes of the everyday Egyptian. And as the January 25 anniversary of the still-recent revolution reminds us, the everyday Egyptian can be a force to be reckoned with.
In the photo, Egyptian soldiers stand guard on the bank of the Suez Canal during a ceremony on August 6, 2015 to unveil a new waterway, in the port city of Ismailiya
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