New military company established with wide mandate

The Ministry of Military Production issued a decree this week ordering the establishment of a military company conducting wide-ranging activities in the fields of contracting, construction and development.

According to the decree, published in the Official Gazette on May 18, the company, named MP for Engineering Projects, Consultancies and General Supplies, shall enjoy financial and administrative independence.

The decree stipulates that the newly established company serves the Armed Forces, as well as other parties, in a wide range of services including development, contracting and construction for housing, sports facilities, schools, hotels, tourist resorts, hospitals, factories and roads. The company will also engage in urbanization and urban development activities, public relations and advertisement, real estate investment and tourism.

The company has been established on LE100 million worth of capital, and is fully owned by the National Authority for Military Production. Its shares will not be sold on the stock market. The authority will appoint the company’s CEO, while the minister of military production will head the company’s general assembly.

The company’s establishment adds to the military’s portfolio of economic activities, which have reportedly been expanding, especially since Abdel Fattah al-Sisi assumed the presidency in 2014.

While accurate records have not yet been not disclosed, some estimate the Armed Forces’ share of the Egyptian economy to be at least 40 percent, a figure Sisi disclaimed in his Reuters interview during his presidential campaign in May 2014. Sisi insisted that the military’s actual economic share does not exceed 2 percent. In the same month, he mentioned that same figure in a different interview with local media, where he also confirmed that the military would not take over the private sector’s role, and that the military’s involvement in the economy is only to provide for itself. The military does not have a parallel economy to the state’s, he added.

Besides the National Authority for Military Production, the military conducts its economic activities through the Authority for National Services Projects, the Arab Authority for Industrialization and the Armed Forces Engineering Authority. The Engineering Authority alone has conducted more than 400 projects in the last two years, according to a statement by General Ahmad Taher Abdallah, the authority’s head from last year.

The National Authority for Military Production runs no less than 18 factories for military and civilian production.

In a previous interview with Mada Masr, Amr Adly, the economist working with Carnegie Middle East Center, stated that the military institution is set to compete with big private corporations on major contracts, such as Orascom Construction and the Arab Contractors.

This expansion has been met by some resistance from businessmen, such as business tycoon Naguib Sawiris who said in a TV interview in mid-2014 that he stands against the military involving itself in major civilian national projects.

Meanwhile, other businessmen, such as mogul Sherif al-Gabaly, said that the military expansion into the economy is only temporary and shall not continue.

The exemption of military projects from taxation and financial oversight has long been one of the reasons for criticism of military involvment in economic activities. In the newly issued decree, members of the Central Auditing Authority have the right to attend the company’s general assembly meetings, but do not have voting rights.