The military crowds out civilian business in Egypt

During recent months, the Egyptian Ministry of Defense was awarded several contracts by the Ministries of Health, Transportation, and Housing and Youth worth over $1 billion to carry out large infrastructure projects. The Egyptian Cabinet of Ministers justified its choice of the army over private companies for these undertakings, which range from building new highways and low-income housing to renovating public hospitals and youth centers, on the basis of the army’s efficiency, discipline in rapidly implementing projects, and high standards.

Assigning domestic infrastructure projects to the military is hardly a new practice by Egyptian authorities. But the army’s renewed role in Egypt’s domestic affairs—especially since its ousting of then president Mohamed Morsi in July 2013 and the inauguration of Abdel Fattah el-Sisi as president in June 2014—as well as several recent legal measures with bearing on this issue have raised basic questions about the commercial role of the military, especially the fairness and accountability of its practices. Particularly significant are a number of major new contracts with the United Arab Emirates (UAE). Worth billions of dollars, these agreements reinforce the controversial trend toward a greater role for the Egyptian military in Egypt’s civilian economic affairs.

Traditionally, Egyptians hold the military establishment in high esteem as an icon of national pride and regional power projection. Separate from its role as guardian of the state, however, Egypt’s army has invested for decades in industrial projects that manufacture both military and civilian equipment.
Three specialized enterprises and their subsidiaries run by the Defense Ministry play a direct role in the military’s domestic economic ventures:

1. National Service Projects Organization

Established in 1979, the National Service Projects Organization (NSPO) has the mission of helping the Egyptian military avoid dependence on the private market for obtaining goods. The body has created companies controlled by the military that invest in different sectors of the domestic economy.

The organization’s website currently lists ten companies that the NSPO owns, spanning a wide range of sectors from construction to agriculture to food and dairy products. Any goods that these companies produce that exceed the military’s needs (and such surpluses always occur) are sold in the local economy as part of a commitment to “social responsibility.”

2. Arab Organization for Industrialization

Egypt, Saudi Arabia, Qatar, and the UAE created the Arab Organization for Industrialization (AOI) in 1975 in a bid for a collective Arab defense industry. After Egypt signed a peace treaty with Israel in 1979, the other Arab states pulled out their shares, and Egypt became the sole owner of the enterprise.

The AOI focuses on supplying the defense equipment needs of the Egyptian Armed Forces and uses excess capacities for supporting community development projects in the fields of infrastructure, environmental protection, and transportation. The organization runs eleven factories across Egypt that produce military and civilian equipment and has several international joint ventures with European, American, and Asian conglomerates.

3. National Organization for Military Production

The National Organization for Military Production is run by the Ministry for Military Production. It manages over fifteen factories that produce mainly military armaments and munitions, in addition to some civilian goods such as electronics and sports equipment.