Sisi says military economy is 1.5% of Egypt’s GDP, but how accurate is this?
Analysts raise concerns over lack of transparency regarding the economic activities of the Armed Forces

The economic activities of Egypt’s Armed Forces is a topic that has been widely discussed in recent months, with analysts speculating as to how much the military economy constitutes of the nation’s Gross Domestic Product (GDP). Estimates generally range from 5 to 40 percent.

At a youth conference in Sharm el-Sheikh last week, President Abdel Fattah al-Sisi said the economic activities of the Armed Forces constitute between 1 and 1.5 percent of GDP. In the first nine months of the 2015-16 Financial Year, Egypt’s GDP was LE2 trillion, according to the Planning Ministry. Using Sisi’s calculations, this would put their activities at between LE20 and LE30 billion.

The official allocation for defense and national security is LE47 billion in the 2016-2017 national budget, but Sisi acknowledged at the youth conference that the Armed Forces purchases weapons and equipment from their own budget reserves.

There are four bodies affiliated with Egypt’s ministries of defense and military production: The National Services Projects Organization, the Arab Organization for Industrialization, the National Organization for Military Production and the Armed Forces Engineering Authority.

The Armed Forces has been expanding its economic activities over the last couple of years into healthcare, roads, education, electricity, energy, fish farming, and other sectors, as Mada Masr showed in a report published last September.

Estimations vary as to the size and scope of the military economy. Economic researcher and CEO of the state-owned Al-Ahram newspaper, Ahmed al-Naggar, estimates the military’s economic activity constitutes less than 5 percent of Egypt’s GDP, while other estimations put it as high as 35-40 percent.

Senior associate at the Carnegie Middle East Center, Yazid Sayigh, who focuses on the political role of Arab armies, thinks Sisi’s estimations accurately reflect the official book value for the Armed Forces, but he highlights other activities, such as private-sector partnerships for land ownership that he says are unlikely to be included in these calculations.

Sisi issued a decree in December 2015, permitting the military to form companies or partnerships for land ownership with local or foreign investors, giving the Armed Forces a share of the revenue when the company is sold and enabling them to retain ownership of the land.

The Armed Forces is also overseeing a number of large-scale development projects, which it contracts out for commission, Sayigh adds. For example, in October 2013, the cabinet contracted the completion, maintenance and management of the Cairo-Alexandria desert road to the National Company for Construction and Development of Roads, which is affiliated with the Defense Ministry’s National Services Projects Organization.

“We don’t need to demand the military gives up economic activity, we only need to demand oversight, balance and transparency.”

Given that it is common for militaries around the world to form private-sector partnerships and defense contracts with private companies, analysts say the main issue in Egypt is not the scale of the military economy as much as the lack of transparency and civilian oversight concerning it.

Sayigh points to judicial amendments made in April 2012, stating that only the Armed Forces are eligible to review cases of unlawful gains where military officers — whether in service or after their retirement — are defendants.

The military’s economic activities are the result of hard work and “sweat,” which the Central Auditing Authority (CAA) overseas through hundreds of committees, according to General Mahmoud Nasr, deputy defense minister for financial affairs, and member of the Supreme Council of the Armed Forces in 2012. Sisi reiterated this at the youth conference: “The military’s economic activities are supervised by the CAA,” he declared.

Sayigh says the military’s economic activities are internally audited, adding that he’s aware of an office affiliated with the Ministry of Finance that specializes in auditing the military’s economic bodies.

“When the military receives a contract through the government, it presents paperwork for it, but there is no way to verify the accuracy of these papers,” he says.

Ahmed Abd Rabou, a visiting scholar at the Center for Middle East Studies at the University of Denver, agrees with Sayigh, adding that there is a big difference between mere access and oversight. “I believe Egypt’s regulatory bodies do conduct inspections, but I doubt they oversee anything, as they don’t have the authority, or legal or constitutional tools for such oversight,” he says.

Sayigh highlights the experiences of other countries in holding militaries accountable for their economic activities, including China and Turkey. The Turkish government determined to stop all civil economic activity of its military two years ago. A few years before this, the Central Committee of the Chinese Communist Party dismantled the military’s economic empire.

“The problem with Egypt is there are no laws or a political balance to ensure the fairness of competition between economic institutions and the military institution,” says Abd Rabou.

Sayigh says Sisi has entrusted the military with a large amount of economic activity in his quest to complete large-scale projects in record time, considering the Armed Forces to be the only state institution capable of such a mission. “Every time the military takes on a new role, it is additional proof that one of the state’s civilian bodies is unable to do its job,” he says.

In an interview with the privately-owned CBC channel one day before Sisi’s statements at the youth conference, Prime Minister Sherif Ismail said the military’s economic role would diminish within the next two or three years. But Sayigh says this is hard to imagine, as it would mean civilian bodies stepping up significantly.

“On the contrary, this is an ideal time frame if there’s the political will to do so,” says Abd Rabou, who adds, “We don’t need to demand the military gives up economic activity, we only need to demand oversight, balance and transparency.”

Translated by Lina Attalah. 

Mohamed Hamama 

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