In the landscape of the Egyptian economy, sovereign institutions have long played a pivotal role, operating outside the traditional rules of competition. This dominance has led to monopolistic practices that have overshadowed key sectors and hindered the private sector’s ability to grow and expand. However, a recent decision aims to curb such practices in an attempt to restore balance and allow greater space for free market mechanisms—raising hopes for a genuine transformation in the economic structure.
President Abdel Fattah el-Sisi has issued directives instructing the government not to enter into any contracts with four sovereign entities without first presenting them to him for approval. This directive was outlined in a circular issued by Osama Saad, Secretary-General of the Council of Ministers, and addressed to Deputy Prime Ministers Dr. Khaled Abdel Ghaffar and Lieutenant General Kamel al-Wazir, as well as all ministers, governors, and heads of government bodies and agencies.
The circular specified the four entities affected by the directive: the Ministry of Military Production, the General Intelligence Service, the Military Intelligence Authority, and the Arab Organization for Industrialization. It also confirmed that the implementation of these instructions began on November 12 of last year.
Among the contracts concluded before this decision, one notable example emerged last March when details surfaced about agreements between the General Intelligence Service and several government ministries, including the Ministry of Health. One such contract involved the maintenance of medical equipment in hospitals affiliated with the ministry for seven years. The agreement maintained previous conditions while adding a scheduled annual increase. At the time, health directorates were instructed to compile a list of hospitals and new equipment to be included in the contract and to notify the ministry within a short timeframe.
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The Tender Loophole
Despite the significance of this decision, certain loopholes have emerged that could be exploited. The affected institutions are still allowed to participate in tenders through their affiliated companies. This has been observed in some ministries, such as the Ministry of Irrigation, which issued an official circular to department heads stating that tenders or procurement processes involving the entities covered by President Sisi’s decision are exempt from the restrictions. This effectively allows these institutions to remain involved in economic activities indirectly, raising questions about the seriousness of the decision and its enforcement mechanisms. Will it be sufficient to prevent these entities from influencing major deals as they did in the past, or will they find new ways to circumvent the restrictions?
Abdelnabi Abdelmotaleb, an economic expert, argues that President Sisi’s announcement of a ban on contracting with sovereign entities carries multiple implications—both political and economic. He notes that this move aligns with Egypt’s commitments to the International Monetary Fund (IMF), which has stipulated that Egypt must reduce the dominance of these institutions over the economy as part of its loan agreements. These entities, which enjoy special privileges, have faced growing criticism for their monopolistic role, which stifles fair competition. The announcement can thus be seen as a message to the IMF, signaling the government’s commitment to structural reforms aimed at encouraging private sector growth and fostering a more transparent investment environment.
Speaking to Zawia3, Abdelmotaleb explains that the private sector has long suffered from restrictions due to competition from these privileged entities, which benefit from exemptions and extraordinary advantages. The decision appears to be an attempt to rebalance the economy by limiting the role of sovereign institutions in non-strategic sectors and allowing the private sector to take the lead in development. Additionally, the decision could help alleviate financial burdens on the state budget, as sovereign entities manage large-scale projects that often come with high costs—some of which do not yield substantial economic returns. By restricting these entities, the government could shift such projects to the private sector, which may operate them more efficiently and at lower costs.
The economic expert further analyzes the decision, emphasizing that it comes amid growing pressure from both local and international actors demanding greater transparency in government projects. The undeclared dominance of sovereign entities over the economy has drawn widespread criticism from local experts and international institutions alike. One of the major challenges facing Egypt’s economy is the lack of transparency and accountability, which creates an environment susceptible to corruption. Sovereign institutions, which previously managed projects without competition, have faced accusations of monopolizing resources and leveraging their influence for economic gains. The decision, therefore, seeks to curb such practices and establish new rules for fair competition.
Finally, Dr. Abdelmotaleb agrees that the loopholes could be exploited, cautioning that these entities may still circumvent the restrictions through their subsidiary companies to participate in tenders. The Ministry of Irrigation, for instance, might witness such interventions, which could weaken the impact of the decision in achieving its intended objectives.
Challenges of Transparency and the Military Economy
Dr. Mamdouh Al-Munir, an economic expert and former president of the International Academy for Studies and Development, described the decision as a possible maneuver to appease the International Monetary Fund (IMF). He pointed out that the timing of the decision coincided with the presence of an IMF delegation in Egypt for negotiations with the government. These discussions largely focused on postponing economic reforms that would increase the financial burden on citizens. However, Al-Munir argues that the decision does not provide an effective solution but rather represents a futile maneuver, especially given the government’s continued price hikes on goods, energy, and public services over the past ten months—without implementing any measures to ease the financial strain on citizens.
Speaking to Zawia3, Al-Munir explains that the government faces challenges in complying with IMF conditions related to sovereign entities and the economy. These challenges revolve around two key points:
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The military’s withdrawal from the economy, a condition aimed at ensuring that the private sector can operate without state-backed competition.
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The government’s exit from non-strategic sectors and a focus on enhancing transparency, an area that Al-Munir describes as being in a state of decline.
The economic expert further notes that the decision was issued just two days before the IMF delegation left Egypt without reaching an agreement or making progress on loan disbursements. The IMF only issued general statements, suggesting a lack of tangible outcomes. While previous government maneuvers, such as pledges to adopt a more flexible exchange rate, have succeeded partially in the past, Al-Munir warns that such tactics may not always be effective. He stresses that transparency remains the foundation of any sustainable economy.
Lack of Institutionalization and Accountability
Al-Munir criticizes the exclusion of regulatory and oversight institutions, emphasizing that the government’s current practices—such as direct contracting assignments—pose a major obstacle to achieving transparency. He calls for a genuine shift away from these methods by replacing them with transparent tenders based on detailed quality studies and clear bidding requirements.
In this context, the former president of the International Academy for Studies and Development refers to a previous statement by President Sisi, in which he asserted that special funds are under his direct supervision. This raises questions about the government’s commitment to transparency and accountability in managing the economy.
Al-Munir stresses the need for the Egyptian government to adopt a transparent and institutional approach to economic management, steering away from practices that hinder economic development and foster a corrupt environment—including the criminalization of information and the lack of clear mechanisms for fair competition.
The economic expert also points to a recent legal opinion issued by the Egyptian Council of State approximately a month ago, which deemed the assignment of the development of the National Museum of Civilization and the Gezira Opera House to the National Service Projects Organization (affiliated with the Ministry of Defense) as illegal. This ruling further reinforces accusations that the government is failing to comply with legal regulations.
Violations by the National Service Projects Organization
A judicial ruling has revealed blatant legal violations in the procedures for awarding two contracts between the Fine Arts Sector of the Ministry of Culture and the National Service Projects Organization (NSPO), affiliated with the Ministry of Defense. These contracts, valued at a total of EGP 189 million, involved the completion of development works for the National Museum of Civilization and the Gezira Museum at the Cairo Opera House. The ruling highlighted that these contracts were awarded through direct assignment, constituting a clear breach of the Public Procurement Law.
According to the legal opinion, in February 2020, the head of the Fine Arts Sector signed a contract with NSPO to continue the museum development project, following the termination of a contract with Hassan Allam Construction Company. This contract, worth EGP 89.4 million, was signed without a clear bidding document, without precisely defining modifiable contract terms, and without establishing a timeline for execution. In October 2021, a new contract was signed for additional work on the same project, valued at over EGP 100 million, and awarded through the same non-transparent direct assignment process, bypassing legal procurement procedures.
In June 2023, NSPO requested compensation for price differences resulting from economic policy changes during that period. Following this, the Minister of Culture sought the Council of State’s opinion on the legality of these compensation claims and the validity of the contract procedures. The ruling confirmed that these contracts violated public procurement laws, as no technical documents were prepared outlining the bidding terms and modifiable conditions, significantly undermining project transparency. However, the ruling also stated that the contracts had become legally binding, as terminating them at this stage could cause severe financial and operational disruptions to public interests.
The ruling further noted that 67% of the project had already been completed, reinforcing the need to continue the development work to avoid wasting allocated financial resources. This figure aligns with a January 2023 statement from the head of the Fine Arts Sector, who indicated that approximately 70% of the museum’s development had been finalized. Despite the contracts being legally upheld, the ruling emphasized the necessity of holding those responsible accountable through civil, disciplinary, and criminal liability measures. It also stated that the final decision on whether NSPO is entitled to compensation falls under the jurisdiction of the Higher Compensation Committee and the Council of Ministers, in accordance with relevant regulations.
Loan Freeze and Its Negative Effects
Economic researcher Mohamed Rizk stated in a Facebook post that the decision to ban sovereign entity contracts might be nothing more than “ink on paper.” He expressed concern that the International Monetary Fund (IMF) is approaching a freeze on the loan allocated to Egypt, which could push the economy into a dark tunnel, threatening a severe food crisis.
The researcher explained that the IMF’s position remains firm, and that Egypt had previously signed the Letter of Understandings regarding the latest loan. However, President Abdel Fattah El-Sisi’s directives to the Prime Minister placed procedural obstacles for sovereign entities that dominate a significant share of the Egyptian economy. Still, this did not meet the IMF’s expectations.
Rizk pointed out that the IMF demands the withdrawal of sovereign institutions from the economy or at least subjecting them to private sector conditions to facilitate economic development. However, he described achieving this demand in reality as nearly impossible due to deep-rooted structural obstacles.
The researcher affirmed that the IMF’s demand for a flexible exchange rate aims to bridge the dollar gap, but he warned that lifting state control over exchange rates would lead to the return of the black market, which could push the dollar past EGP 100, worsening inflation and causing a surge in commodity prices.
Rizk focused on the private sector’s fundamental role in achieving competitiveness and improving the quality of products and services. He stressed that the consumer is the primary beneficiary of this economic system, as it leads to lower prices and eliminates low-quality products from the market.
Important Warnings
Rizk warns that government competition with the private sector causes numerous damages, the most notable of which are: “Disrupting competitive market mechanisms, as the absence of competition leads to weakened productivity and innovation, while the public sector is often managed with social objectives unrelated to efficiency. Weak allocation of resources, where the less efficient replaces the more efficient, hindering production and exports. Deepening the dollar shortage crisis, as government projects rely heavily on foreign components and easily secure loans in foreign currency but often fail to achieve net exports. Loss of tax revenues, as the government loses taxes paid by the private sector, while government projects enjoy exemptions or lower profits. Weakening the chances of attracting foreign investments, as investors prefer dealing with a stable and transparent private sector rather than competing with the government. Additionally, the state relies on financing projects through borrowing, increasing the debt burden and reducing fiscal space. Financing projects by printing money leads to an increased money supply without a corresponding increase in production.”
The researcher stresses that intensive government intervention is justified by its supporters as a means to prevent merchant greed or compensate for weak oversight. However, he argues that the optimal solution is to enhance transparency and activate fair competition in markets to ensure sustainable economic development.
Researcher Mohamed Rizk calls for a deep understanding of the state’s role in markets, pointing out that its intervention should not compete with the private sector. He explains that the state should only intervene in cases where the private sector refrains from operating in certain sectors, but this reluctance should not result from government legislation or practices that restrict its freedom.
Rizk asserts that the absence of effective oversight and regulation is a deficiency that requires reform, not a justification for government intervention in roles beyond its jurisdiction. He warns that the solution does not lie in replacing the absence of regulation with direct government intervention, but rather in enhancing oversight mechanisms and ensuring transparency.
The researcher believes that returning to the economic principles established by Adam Smith, the founder of modern economics, provides a clear framework for understanding the limits of state intervention. He affirms that the concept of the “invisible hand” is sufficient to refute any claims supporting competition between the government and the private sector as a necessity or an advantage.
Rizk points out that classical economic theories supported the state’s role in infrastructure projects without a private partner, but now these projects have become attractive to the private sector. This has been achieved either through independent execution or public-private partnerships (PPPs), reflecting an evolution in the state’s role in such projects.
The researcher stresses that the government’s social role should not be limited to direct intervention in markets, but rather should focus on: regulating markets to ensure balance between supply and demand and preventing monopolistic practices, directing subsidies to those who truly need them through clear and direct policies targeting the most vulnerable groups, improving the business environment by removing bureaucratic obstacles and providing incentives to attract local and foreign investments, and creating sustainable job opportunities by encouraging small and medium enterprises and providing necessary incentives to support entrepreneurs.
The researcher concludes by affirming that the solution is not in reinventing the economic wheel, but rather in returning to the principles of market regulation and recognizing the state’s limited and balanced role in supporting the economy without competing with the private sector, achieving sustainable development and economic justice.
Ultimately, the decision should represent a significant shift in the management of public resources, but at the same time, it raises fundamental questions about the commitment to implementing it without reversal or circumvention. While the decision carries a positive aspect in strengthening transparency and upholding the principle of equal opportunities, concerns remain about bureaucratic loopholes that could strip the decision of its essence, keeping burdens intact and weakening the hopes for meaningful reform.
In this context, strict oversight and honest implementation remain the most effective tools to prevent the past from returning in its old forms.
