This Land is Their Land: Egypt’s Armed Forces Cement Economic Power

Written by | Wednesday, March 15th, 2017
@Eubulletin

The Egyptian army has been successively expanding its civil and economic activities since the ousting of President Mohamed Morsi in July 2013. International community and private sector have criticized this development, so the government responded in October 2016, saying that the military would decrease its economic role in the upcoming years. However, many believe that this is unlikely to happen due to the strong market position of the Egyptian armed forces as well as their historically ingrained and established privileges. Thus, the military will continue to shape the country’s economic activities mainly in food, energy and construction sectors. The implementation of the structural reforms Cairo agreed on with the International Monetary Fund (IMF) will therefore be challenging, if not doubtful, under these conditions.

Although the Egyptian government is insisting that the army is doing much more than crisis management, the armed forces will probably not withdraw from the country’s economy in the near future. The main reason behind this is the fact that substantial political willpower is needed to prune back military involvement in economic and business demands. However, in contemporary Egypt, President Sisi will do just the opposite – he will continue supporting his generals’ way of business expansion because he is heavily dependent on their backing in the absence of democratic legitimacy. Therefore, the power and influence of the Egyptian armed forces is probably not destined to stagnation – they could easily go up as a result of the interplay between President Sisi and the military.

The economic expansionism of the Egyptian military keeps the country’s public sector contribution to GDP at its existing level, with potential for further increase. Thus, a much-needed space for reforms to boost economic growth is jeopardized despite the generous loans provided by the IMF and other international donors. The international community aims to help Egypt increase competition and improve the climate needed to attract investors – hence also strengthen the private sector, which creates a vicious cycle. Thus, other planned reforms such as the liberalization of the energy market or job creation will also be easily hampered due to the omnipresent influence of the army.

‘Egypt’s Armed Forces Cement Economic Power’ – Commentary by Jessica Noll – Stiftung Wissenschaft und Politik (SWP).

(The commentary can be downloaded here)

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