The Military Mammoth on Egypt’s Streets

An analysis of the causes of Egypt’s economic crisis cannot overlook the enormous losses the country incurs due to the army’s control of the economy.

A photo of Dr. Zvi Bar'el.
Zvi Bar'el
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Egyptian army soldiers taking their positions near armored vehicles which guard the entrances of Tahrir square, in Cairo, Egypt, Monday, July 8, 2013.
Egyptian army soldiers taking their positions near armored vehicles which guard the entrances of Tahrir square, in Cairo, Egypt, Monday, July 8, 2013.Credit: AP
A photo of Dr. Zvi Bar'el.
Zvi Bar'el

The summer English course at the Badr international school chain in Egypt was not intended for children. On the benches sat the students’ parents, who came there four times a week in order to improve their English so they could help their children. These are no ordinary schools. The Badr network “aims to provide kindergarten and elementary school pupils, Egyptian or non-Egyptian, with an educational weapon,” says the school’s website.

The use of the term “weapon” is no coincidence. The Badr network was established by the Third Army in the Suez district, with the intention of turning it into an international educational network operating according to a British or American curriculum, depending on the parents’ choice. There are tuition fees, and students wishing to attend these schools have to submit documentation showing their parents’ level of education.

What has the army got to do with a network of schools? What does it have to do with education in general? The same question can be asked about the order stating that the army will from now on import baby food, after this product could not be found in stores for months. Even when found it is very expensive, costing 60 Egyptian pounds ($6.8) a box. The army will sell it for half that price.

“We’re saving Egyptian citizens many costs, providing essential goods,” explained Mohammed el-Assar, the minister for military production. He didn’t explain, however, why the military have to be the importer and not a private company which would be subject to oversight.

The opposition website al-Mada al-Masri, which doesn’t fear publishing information that mainstream media cannot, published a long list of projects and assets controlled by the army. Among other items, the army will establish a factory for producing vaccines, import stents for cardiac patients, provide medicine to all university medical schools, and disseminate hundreds of thousands of water meters and smart cards for government employees, with which their movements at work can be monitored.

The Egyptian army was always an inseparable part of Egypt’s economy. Unofficial estimates suggest that it controls around 40 percent of it, with other estimates showing it responsible for 20 percent of the annual gross domestic product. A year ago, President Abdel-Fattah al-Sissi said in an interview that the army controls only 2 percent of the Egyptian economy. It’s hard to relate to this figure seriously, with the army in charge of building neighborhoods and paving major highways, while controlling some 80 percent of the land, according to some estimates.

There is hardly any branch of Egypt’s economy in which the department of national services at the Ministry of Defense is not involved. Since Sissi took over in 2013, he has significantly expanded the army’s involvement in the economy, granting it extensive-ranging licenses in communications, housing, water and civil administration, and particularly control over thousands of acres of government land for the purpose of building commercial centers.

The great advantage the military has over private or government-owned companies is threefold: The army is exempt from any taxes or tariffs on goods it imports or on profits it makes operating civilian projects; it can employ soldiers in these projects; and pay them low wages, without having to negotiate labor agreements or contend with strikes, since it can operate its civilian branch through commands and instructions.

Ostensibly, this could give an enormous economic advantage to the government, which could save on expenses while erecting projects quickly and more efficiently. The army should also benefit from increased revenues, which could cover some of its running expenses and purchase arms beyond the regular budgetary framework. There are estimates that the annual budget for the army is $4.4 billion, but this is only an estimate since no agency, in parliament or the media, is allowed to oversee expenses or report data related to them.

Army revenues from civilian projects are also classified, so the public doesn’t know how much it costs the military to build apartments or buy villas for its officers, or how much the state loses through the tax exemptions enjoyed by the army. A theoretical calculation by an Egyptian economist, based on modest estimates, suggests that the army produces 18 percent of the GDP. It also concludes that the government lost 65 billion Egyptian pounds ($7.3 billion) in 2015 alone, which could otherwise have gone to pay for health services or schools.

This estimate was obviously not published in an Egyptian newspaper but on a Saudi website, since in Egypt the author could have been arrested. Anyone looking at the causes for the economic crisis in Egypt cannot overlook the enormous military mammoth walking freely through the streets of Egypt, contributing its far from negligible part to the collapse of the economy.

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