{"id":12961,"date":"2025-05-29T14:00:37","date_gmt":"2025-05-29T12:00:37","guid":{"rendered":"https:\/\/zawia3.com\/?p=12961"},"modified":"2025-05-29T14:00:37","modified_gmt":"2025-05-29T12:00:37","slug":"egyptian-military-economy","status":"publish","type":"post","link":"https:\/\/zawia3.com\/en\/egyptian-military-economy\/","title":{"rendered":"Egypt\u2019s Army Inc.: The Rise of a Military Economy"},"content":{"rendered":"

Since 2014, with President Abdel Fattah El-Sisi’s rise to power, the economic influence of Egypt\u2019s armed forces has expanded at an unprecedented rate. The military’s investment network has stretched to encompass dozens of companies and projects across various civilian sectors\u2014from construction and real estate development to food industries and logistics services.<\/p>\n

While international institutions like the International Monetary Fund (IMF) and the World Bank have repeatedly expressed concern over the military\u2019s deepening role in the economy, both domestic and international observers are increasingly focused on analyzing the impact of this presence on fair competition and sustainable development. In this investigation, Zawia3<\/em> presents a detailed examination of the phenomenon, supported by field testimonies and data from credible sources.<\/p>\n

The military’s control over vast economic sectors has created a highly unbalanced competitive environment, weakening the ability of the private sector\u2014and even civilian state-owned companies\u2014to survive and compete. Military-affiliated companies enjoy exclusive privileges, including tax and customs exemptions, the use of conscripts as low-cost labor, and preferential treatment in the direct awarding of government contracts.<\/p>\n

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One of the clearest examples is the military\u2019s entry into the cement industry. In 2018, it established a massive plant with an annual production capacity of 13 million tons<\/a>, despite an existing market surplus. According to Reuters, this aggressive entry disrupted market equilibrium and inflicted severe losses on private companies, including foreign investors. Some firms were forced to suspend operations or exit the market altogethe<\/a>r.<\/p>\n<\/blockquote>\n

These privileges granted to the military establishment\u2014combined with broad exemptions<\/a>\u2014have raised growing concern among both local and international business communities, especially as direct awards of projects continue without open competition. Reports from the World Bank and the IMF have warned that this dominance hinders the growth of the private sector and undermines its ability to create jobs, which in turn affects investment indicators.<\/p>\n

According to World Bank data<\/a>, the average private investment in Egypt over the past decade stood at about 6.3% of GDP<\/strong>, amounting to no more than one-fifth of the average for middle-income countries. Egypt\u2019s ranking in the Heritage Foundation\u2019s Index of Economic Freedom<\/em> also declined to 130th out of 178 countries<\/strong> in 2021, reflecting a stifling business environment under the weight of state and military market intervention.<\/p>\n

Evaluations from the Middle East Initiative<\/em> at Harvard University indicate that the military\u2019s expanding role has dampened the pace of economic growth. Economist Ishac Diwan<\/em> notes in this context:<\/p>\n

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\u201cAn economy dominated by the military is less capable of achieving sustainable growth than one run by civilian elites\u2014even if those elites are corrupt.\u201d
He attributes this to the fact that military officers monopolize resources and deals in ways that go beyond what occurred under the business elite tied to the Mubarak regime<\/a>.<\/p>\n<\/blockquote>\n

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\u201cWe Were Squeezed Out\u201d: How Military Expansion Reshaped Egypt\u2019s Construction Sector<\/strong><\/h3>\n

Abdel Salam<\/em> (a pseudonym), a contractor who has worked in the construction sector for over twenty years, was forced to scale down his business by more than 70% since 2018 due to the growing dominance of companies affiliated with the Engineering Authority of the Armed Forces. Speaking to Zawia3<\/em>, he explained that these companies, which enjoy special privileges allowing them to carry out most of the state\u2019s projects, pushed him to lay off hundreds of workers and dozens of engineers. He now only manages a handful of projects, which he can access only through a middleman\u2014one of the major contractors who deal directly with the Authority, in what he described as a tiered subcontracting system overseen by military-affiliated contractors.<\/p>\n

Abdel Salam, who inherited the profession from his father in the 1950s, said the market dynamics changed entirely after 2013. Whereas tenders were previously handled through local administrative entities like councils and municipal units, today the Engineering Authority monopolizes oversight of major projects across the governorates, benefiting from wide-ranging tax and customs exemptions and the absence of real competition. \u201cNow, projects are distributed by the Authority to select contractors, who then allocate them to smaller firms\u2014sometimes through lotteries, other times based on personal ties or preferences,\u201d he added.<\/p>\n

He described the nature of this monopolization in more detail: \u201cThe Authority carries out about 90% of public projects\u2014either directly through its own offices and companies under the National Service Projects Organization, where civilian labor does not exceed 2%, or through designated large contractors who distribute the work. The problem is that this structure excludes small- and medium-sized contractors and limits their opportunities to scraps\u2014without any guarantee of profit.\u201d<\/p>\n

\u201cAt first,\u201d he said, \u201cwe tried to keep up by pursuing Engineering Authority projects, which seemed like the only path to survival. But we quickly ran into serious problems\u2014delays in payment, and no guarantees for collecting final dues after completing the work. Expected profits turned into accumulating losses.\u201d<\/p>\n

The most significant issue, he explained, lies in the Authority\u2019s internal operating model. It relies heavily on conscripts who are not paid market wages and exempts itself from taxes, giving it a massive advantage in reducing total costs. \u201cThe problem isn’t just unfair competition\u2014it also affects the quality of the work,\u201d he continued. \u201cA contractor might be awarded a project worth 100 units, but after deductions by the Authority, he receives only 50 or 60 units. Yet he’s still expected to deliver the full-quality result. To make a profit, some resort to poor-quality materials or unsafe construction methods. I refused to do that\u2014and that\u2019s why my company collapsed.\u201d<\/p>\n

Abdel Salam concluded by saying that what\u2019s happening is not only sidelining independent contractors\u2014it\u2019s threatening the future of Egypt\u2019s civilian construction sector and widening the divide between the open market and a parallel economy that enjoys dual immunity: legal and financial.<\/p>\n

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Don’t miss: Illegal Construction in Egypt Referred to Military Courts<\/a><\/strong><\/p>\n

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An Unprotected Market<\/strong><\/h3>\n

Hossam El-Dardiry<\/em> (a pseudonym), an Egyptian contractor, told Zawia3<\/em> that the increasing involvement of the military establishment in the construction market in recent years has had devastating effects on the private sector. He explained that nearly 1,000 companies were operating in the market before this expansion, and half of them have completely ceased operations due to the dominance of the Armed Forces Engineering Authority.<\/p>\n

\u201cNo fewer than 500 companies have shut down,\u201d he said, \u201claying off their workers and engineers, abandoning their equipment and investments. They simply could no longer continue because the rules of competition had completely changed. It became impossible to keep up with the privileges granted to military-affiliated companies.\u201d<\/p>\n

As for the remaining half, El-Dardiry explained it, too, split into two parts:
\u201c250 companies were forced to declare bankruptcy due to accumulated debt and their inability to cover expenses, and the other 250 companies remain trapped in projects with the Engineering Authority. These firms can\u2019t withdraw despite ongoing losses because they are bound by contracts that required massive investment\u2014backing out would mean complete financial collapse.\u201d<\/p>\n

El-Dardiry cited a case he described as \u201ca blatant example of distortion,\u201d involving an Emirati grant allocated to fund youth housing projects in Egypt. According to his account, the grant was paid in full and in cash, and several contractors\u2014including his own company\u2014were contracted to carry out these projects at designated sites. The construction was completed and handed over after final finishing work.<\/p>\n

But the surprise, he said, was that official contracts were not signed with the contractors until after project completion, and payments were issued through delayed \u201cpayment certificates,\u201d which exhausted the companies financially and stripped them of any chance at making a profit.<\/p>\n

\u201cInstead of being used to support youth, as the grant was intended,\u201d he added, \u201cthe funds were used to pay our overdue installments\u2014piecemeal and slowly. Often, the payments were delayed or deducted without explanation. This way, we absorbed the losses, while the implementing authority\u2014the military\u2014received the full funding upfront.\u201d<\/p>\n

El-Dardiry concluded by warning that this type of practice doesn\u2019t just weaken contractors\u2014it threatens their very existence, effectively dismantling the local private sector in favor of a closed system that operates outside market rules and fair competition.<\/p>\n

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Unofficial estimates<\/a> indicate that the Egyptian military controls between 25% and 40% of the country\u2019s economy. The military enjoys competitive advantages that make it difficult for the private sector to compete. The first of these advantages is exemption from taxes and customs duties under legal provisions such as Article 47<\/a> of the 2005 Income Tax Law.<\/p>\n

Additionally, Article 19<\/a> of the Customs Exemptions Law stipulates:<\/p>\n

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\u201cExempt from customs duties, under the conditions and procedures defined by the executive regulations, are all imports by the Ministry of Defense and its agencies, companies, units, and entities affiliated with the Ministry of Military Production, the General Intelligence Service, and the Ministry of Interior. These include weapons, ammunition, equipment, transportation means, official-use passenger vehicles for the Ministry of Defense, materials, tools, machinery, equipment, and medical supplies and medications\u2014imported in the name of these entities or on their behalf\u2014for the purposes of armament, defense, or security, and without the requirement for inspection.\u201d<\/p>\n<\/blockquote>\n

The armed forces have executed<\/a> massive projects across multiple sectors\u2014including infrastructure, housing, industry, agriculture, and tourism. Notable projects include the Suez Canal expansion (2014\u20132015) at a cost of $8 billion,<\/a> and the New Administrative Capital, which is managed by a military-affiliated company holding a 51% ownership stake.<\/p>\n

The Engineering Authority of the Armed Forces alone implemented 276 projects worth 198 billion EGP ($3.96 billion) up to 2021, including 25 roads in Sinai spanning 1,185 kilometers. In the industrial sector, the military has established cement and marble factories, and acquired major shares in phosphate and gold production. In agriculture, the National Service Projects Organization runs farming and fish farming projects, relying primarily on conscripts as labor.<\/p>\n

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Conscripts in Service of the Military Economy<\/strong><\/h3>\n

The impact of the military\u2019s expansion in Egypt\u2019s economy has not been limited to companies\u2014it has also reshaped the labor market, introducing a model heavily reliant on mandatory conscripts as a low-cost workforce. Military-owned economic projects employ tens of thousands of conscripts who, during their mandatory service, are assigned to perform civilian tasks ranging from construction and fuel station operations to food production in factories.<\/p>\n

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Despite the civilian nature of these duties, conscripts do not receive the rights afforded to regular workers. According to independent reports<\/a>, the average monthly wage for a conscript in one of the military\u2019s economic units is no more than 250 EGP ($5)<\/a>, far below even the lowest wages in the civilian labor market. Moreover, conscripts are not covered by labor laws, but instead fall under the military legal framework, which means they are denied union protection, the right to collective bargaining, the right to strike, or even to object to their working conditions.<\/p>\n<\/blockquote>\n

This vulnerability is further compounded by the rigid military hierarchy, which requires conscripts to follow orders without objection, in environments that lack independent oversight mechanisms\u2014making it easier for abuse and harsh working conditions<\/a> to go unchecked.<\/p>\n

From the military\u2019s perspective, this model provides a significant financial advantage, as labor is secured at nearly no cost. However, it directly impacts the competitiveness of civilian companies\u2014both private and public\u2014who must pay higher wages and comply with legal and insurance obligations, in a market devoid of equal conditions.<\/p>\n

Although official statements claim that military projects provide job opportunities for up to 5 million civilians, many experts describe a large portion of these positions as “disguised unemployment,” due to their temporary nature or low productivity\u2014especially when assigned to conscripts. Meanwhile, unofficial estimates suggest that youth unemployment in Egypt may be as high as 28.5%, highlighting the gap between the apparent expansion in job opportunities and the reality of sustainable employment.<\/p>\n

The military also maintains exclusive control over major infrastructure projects<\/a>\u2014such as roads and bridges\u2014through direct allocation without open bidding, limiting the private sector\u2019s opportunities and deterring foreign investors. This weakens economic growth and reduces the potential for creating permanent jobs outside the military establishment.<\/p>\n

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While preparing this investigation, Zawia3<\/em> spoke with dozens of former and current conscripts who served in projects under the National Service Projects Organization and the Engineering Authority. They unanimously reported low wages, long working hours, lack of health or insurance coverage, and the absence of any human-centered management. They confirmed that the tasks assigned to them were not treated as jobs, but rather imposed as \u201cmilitary duties,\u201d which they had no right to question and for which they received no recognition as productive labor.<\/p>\n<\/blockquote>\n

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\u201cLike Labor Without Rights\u201d: Conscripts Describe Harsh Conditions on Military Projects<\/strong><\/p>\n

Saaed<\/em>, 23, from Assiut Governorate, shared his experience with Zawia3<\/em>: \u201cI joined the military service in 2021 and was assigned to a construction site run by the Engineering Authority in the Delta region. I worked every day carrying iron and cement, helping pour concrete, from 6:00 a.m. until sunset\u2014around 7:00 p.m.\u2014and sometimes even longer if the leadership needed the project completed quickly.\u201d<\/p>\n

He continued: \u201cThe working conditions were harsh. The heat was extreme. Some of my colleagues couldn\u2019t handle it. One of them had chronic low blood pressure and would frequently faint due to the heat. We worked long hours without proper rest breaks, and there were no real safety measures in place. My monthly wage didn\u2019t exceed 300 EGP ($6)<\/strong>, while civilian laborers performing the same tasks were earning 200 EGP ($4)<\/strong> per day.\u201d<\/p>\n

Mostafa<\/em>, from Sohag Governorate, who completed his military service between 2020 and 2021, said: \u201cI was transferred to the New Administrative Capital and assigned to one of the tower sites. We performed high-risk, skilled tasks like scaffolding, lifting heavy materials, and unloading cement. The work began at 5:00 a.m. and continued until evening, without fixed hours\u2014it ended only when the task was finished. Often, we didn\u2019t get adequate rest, and the only compensation we received was a small sum of no more than 260 EGP ($5.20)<\/strong> per month.\u201d<\/p>\n

He added that things were different for engineers, both military and civilian: \u201cThey worked fewer hours and received more benefits\u2014rest time, better salaries\u2014and most importantly, they were treated well by the leadership, unlike us conscripts.\u201d<\/p>\n

He clarified: \u201cNot all of them\u2014some commanders treated us with respect, but many treated us poorly and in ways that degraded our dignity.\u201d<\/p>\n

Abdel Rahman<\/em>, from Ismailia Governorate and a university graduate who joined the army with the rank of sergeant, described a slightly different experience:<\/p>\n

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\u201cI served in the \u2018Decent Life\u2019 (Hayah Karima) project in a village in Upper Egypt for two years. I was in charge of a group of conscripts working on sewage digging and road leveling. They worked in extremely difficult conditions\u2014under the scorching sun, in mud and filth, without any real protection or sufficient tools. We lived in inhumane housing, and the food was barely enough. The conscript\u2019s salary didn\u2019t exceed 300 EGP ($6)<\/strong> per month, while civilian contractors were paying their workers many times more. I used to receive complaints almost daily\u2014but there was no response.\u201d<\/p>\n<\/blockquote>\n

Yasser<\/em>, who worked during his service on the Suez Canal Tunnels Project, said: \u201cIn 2019, I was sent with my unit to one of the Suez Canal tunnel sites. The work inside the tunnels was exhausting and extremely dangerous. We were working tens of meters underground\u2014installing pipes, cleaning mud, transporting heavy equipment. There was no real health insurance. And if a conscript got injured? As for the salary\u2014he laughed bitterly\u2014\u2018Not worth mentioning. Barely the price of three packs of cigarettes.\u2019 Roughly 200 EGP ($4)<\/strong>.\u201d<\/p>\n

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Wage Gaps and Forced Labor: The Hidden Cost of Egypt\u2019s Military Economy<\/strong><\/h3>\n

A comparison of wages reveals a stark gap between conscripts and workers in the private sector. Conscripts typically earn symbolic wages ranging from 200 to 500 EGP ($4 to $10) per month, which is far below the minimum required to cover basic needs. In contrast, average wages in the private sector range from 3,000 to 8,000 EGP ($60 to $160) for semi-skilled labor, and significantly more for professional workers.<\/p>\n

Unemployment in Egypt recorded a slight decline in recent years, reaching 6.3% in Q1 of 2025, compared to 6.6% in 2024 and 7.0% in 2023, according to the Central Agency for Public Mobilization and Statistics (CAPMAS). However, youth unemployment (ages 15\u201329) remains high at 14.9% in 2024, with female youth unemployment particularly severe at 37.1%, compared to 9.8% for males. Among young university graduates, unemployment stood at 18.7% in 2024. The labor force participation rate rose slightly to 44.2% in 2024, up from 43.4% in 2023, with the labor force reaching 33.4 million people in Q1 of 2025.<\/p>\n

Experts attribute the continued high unemployment among youth in part to the Egyptian military\u2019s dominance of lucrative economic sectors, such as infrastructure and industry, which limits the growth of the private sector\u2014the main engine for sustainable job creation. While military projects like roads and bridges may offer temporary employment, often using cheap conscript labor, they fail to provide long-term solutions, thereby worsening the unemployment crisis among graduates and young people.<\/p>\n

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Amr Magdy<\/strong>, a researcher on Egypt for Human Rights Watch<\/em>, told Zawia3<\/em> that there are no precise studies to quantify the military\u2019s economic impact, but widespread observations and evidence suggest that the army\u2019s post-2013 expansion into the economy has had direct effects on market mechanisms<\/strong>, including job creation and labor dynamics.<\/p>\n<\/blockquote>\n

Magdy explained that military intervention in certain economic sectors has significantly disrupted the market, as seen in the cement industry. Between 2017 and 2018, the Armed Forces entered the market by establishing new plants and production lines, leading to a sudden surge in supply and forcing both public and private sector factories to shut down. This, he said, is a clear example of how military involvement distorts the labor market.<\/p>\n

He also pointed to official statements that went largely unnoticed, such as the military spokesperson\u2019s 2014 comment about the New Suez Canal expansion, in which he said the army relied on \u201ctwo battalions of soldiers.\u201d Magdy noted that in military terms, a battalion consists of 500 to 1,000 soldiers, meaning thousands of conscripts were employed in civilian roles that could have been filled by civilians.<\/p>\n

Magdy added that the head of the National Service Projects Organization himself stated in a 2016 interview that the organization depends on conscripts\u2014stressing that this isn\u2019t new but dates back to the 1980s, when the military, under Field Marshal Abdel Halim Abu Ghazala, began building large-scale economic projects. At that time, soldiers worked in bakeries, and the military reportedly produced a quarter or more of Cairo\u2019s bread supply.<\/p>\n

\u201cThese scenes were highly visible,\u201d Magdy said. \u201cAnyone who lived through that period remembers soldiers standing in bakeries and next to bread lines. Today, similar images remain visible on the streets: soldiers at fuel stations, vegetable stands, supermarkets, and toll booths on highways.\u201d<\/p>\n

He compared today’s situation to that of the 1980s, asserting that freedom of expression has deteriorated. Back then, criticism of military projects and forced labor was allowed in opposition newspapers like Al-Ahali<\/em> and in parliamentary debates. \u201cNow, after 50 years, the repression is far more severe,\u201d he said.<\/p>\n

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Magdy, who specializes in Egypt at Human Rights Watch<\/em>, emphasized that these roles should be filled by civilian workers paid in accordance with market standards. Using conscripts instead deprives large segments of the population of employment opportunities, particularly women, given the already low female labor force participation in Egypt. Since military service is compulsory only for men, women are automatically excluded from these job opportunities, worsening female unemployment and poverty.<\/p>\n<\/blockquote>\n

He added that some officials defend the military\u2019s use of conscript labor by claiming it teaches them trades or skills that prepare them for post-service employment and that skilled individuals are often retained\u2014a claim repeated by the head of the National Service Organization and other military leaders. But Magdy dismissed this as propaganda: \u201cThe military is not a vocational training institution. It is, by nature, a military body. Preparing citizens for the workforce should be the job of civil educational and training institutions, accessible to all\u2014including women and those exempted from service.\u201d<\/p>\n

He stressed that employing conscripts in civilian roles under the military\u2019s umbrella does not justify forcing them into non-military jobs, nor does it excuse paying them exploitative wages or denying them the right to refuse. \u201cA conscript who refuses an order\u2014such as working at a gas station\u2014can be tried in a military court for disobedience,\u201d he added.<\/p>\n

Magdy also addressed the military\u2019s claims that it is creating jobs through its massive national projects. In reality, he said, the military often does not implement these projects directly, but subcontracts them to Egyptian or foreign companies. These contracts are signed without any transparency\u2014no one knows the cost, terms, or whether they serve the public interest. This secrecy makes it impossible to monitor or hold these military-led projects accountable, as they fall under the umbrella of the military economy, which operates outside civilian oversight.<\/p>\n

He further explained that this model harms the labor market because most workers in these projects are neither official employees of the military nor the Ministry of Defense. Instead, they are typically daily wage workers without legal protections, hired through civilian subcontractors under opaque agreements. He referenced a 2016 or 2017 statement by President Abdel Fattah El-Sisi, who said there were approximately 50,000 civilian employees working in the Ministry of Defense\u2014a very small number relative to the scale of military projects. This implies that the vast majority of civilian workers engaged with the military do not have formal contracts.<\/p>\n

Magdy warned that these workers are vulnerable to military trials, as evidenced in documented cases\u2014such as janitors and security guards in the New Administrative Capital, who were tried by military courts after filming a short video of an under-construction site, despite not publishing it.<\/p>\n

He stressed that the few cases revealed by the media or documented by human rights organizations represent only \u201cthe tip of the iceberg.\u201d The majority of violations remain hidden. He cited the case of workers at the Alexandria Shipyard, who faced severe abuse by the military after attempting to organize peaceful protests or go on strike.<\/p>\n

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Don’t miss: Land for Tourism: Jemima Residents Face Displacement Without Fair Compensation<\/a><\/strong><\/p>\n

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A Closed Economy and a Hostile Business Climate<\/strong><\/h3>\n

For his part, economist Zuhdi El-Shami<\/em> believes that the scale of the military’s economic activity in Egypt has become broad and deeply influential, despite the lack of precise data from official sources. He says: \u201cThe state often downplays the military\u2019s share in the economy, but in reality, a significant number of economic activities have come under military control\u2014a development with wide-ranging consequences.\u201d<\/p>\n

He points out that this situation leads to a major distortion in the structure of the economy, as it disrupts market balance and fair competition. He explains:<\/p>\n

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\u201cWhen an institution operates without being subject to the same legal and financial accountability standards as the private or even the public sector, it undermines the principle of equal opportunity among economic actors and results in the exclusion of entire sectors from the market.\u201d<\/p>\n<\/blockquote>\n

He adds:<\/p>\n

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\u201cThe military doesn\u2019t execute everything on its own. Some projects are carried out by its companies, others require civilian labor. But in the end, the private sector is marginalized\u2014especially small businesses, which have been directly harmed by the military\u2019s expansion into various fields, from selling food products to executing major infrastructure projects.\u201d<\/p>\n<\/blockquote>\n

As for labor conditions, El-Shami clarifies:<\/p>\n

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\u201cEmployment in military projects is fundamentally different from employment in the public sector or private companies. There are no unions, no clearly defined legal rights, no profit-sharing mechanisms, and no worker representation. All of these rights once existed in the public sector, and to some extent in the private sector, but they are absent in military-run projects.\u201d<\/p>\n<\/blockquote>\n

He continues:<\/p>\n

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\u201cWorkers in these projects lack legal protection and operate in an environment devoid of transparency and oversight. The legal framework is vague\u2014there is no accountability, no channel for grievance or collective bargaining. This leaves workers in a precarious situation and further weakens the Egyptian labor market as a whole.\u201d<\/p>\n<\/blockquote>\n

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El-Shami: The Military\u2019s Role Is National Defense, Not Selling Shrimp<\/strong><\/p>\n

Zuhdi El-Shami emphasizes that the military\u2019s natural role is \u201cto protect and defend the nation\u2014not to run wide-ranging economic activities.\u201d He says:<\/p>\n

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\u201cThe army\u2019s involvement in the economy was supposed to be limited and confined to areas linked to military production or strategic infrastructure\u2014not selling shrimp or fava beans.\u201d<\/p>\n<\/blockquote>\n

He asserts that the military\u2019s growing economic footprint has become the subject of both domestic and international criticism, including from the International Monetary Fund (IMF). \u201cEven the IMF, despite its liberal policies which we oppose, has in recent years begun expressing concern about the scale of this expansion\u2014after long ignoring it. But despite that, government responses remain superficial and insincere. There\u2019s no sign of a real intent to reform.\u201d<\/p>\n

El-Shami clarifies that his criticism of the military\u2019s expansion does not mean he endorses the IMF\u2019s agenda<\/strong>:<\/p>\n

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\u201cWe have opposed the IMF\u2019s prescriptions from the start\u2014they\u2019ve led to the destruction and hollowing out of the public sector. But we raised these concerns long before the IMF did. The public sector was gutted with the government\u2019s blessing and the IMF\u2019s approval. As a result, we\u2019ve lost major national assets, and now we\u2019re selling ports, airports, and infrastructure to foreign buyers.\u201d<\/p>\n<\/blockquote>\n

He notes that these policies have created a distorted equation, where:<\/p>\n

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\u201cThe public sector was destroyed in favor of two forces: first, companies affiliated with the military institution; second, foreign investors who purchased state assets. The outcome is that the Egyptian private sector\u2014both small and large\u2014is now trapped and unable to compete.\u201d<\/p>\n<\/blockquote>\n

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A Collapsing Economic Order<\/p>\n

El-Shami concludes that what\u2019s happening in Egypt today is:<\/p>\n

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\u201cA deeply worrying phenomenon: the destruction of the national economic structure.\u201d<\/p>\n<\/blockquote>\n

He stresses that:<\/p>\n

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\u201cThere\u2019s no longer space for real investment\u2014neither from the domestic private sector nor even serious foreign investors\u2014because the investment environment is unstable, competition is unfair, and the legal and regulatory framework is broken.\u201d<\/p>\n<\/blockquote>\n

He ends by saying:<\/p>\n

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\u201cWhat we\u2019re witnessing today is a destructive mix of selling national assets to foreign interests, and the unchecked expansion of a military-run economic sector at everyone else\u2019s expense. This situation can only lead to further economic and social deterioration.\u201d<\/p>\n<\/blockquote>\n

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When Did the Military Begin Investing?<\/strong><\/h3>\n

The Egyptian military\u2019s involvement in the economy is neither recent nor incidental. It is the continuation of a long history of overlap between sovereign functions and the productive role the armed forces have played since the establishment of the republic following the July 1952 Revolution<\/a>. The Egyptian military doctrine has historically been tied, in part, to the concept of a developmental state\u2014one that adopts a broad national project extending beyond security and defense to contribute to economic and social development. Within this context, the military\u2019s early economic ventures began with the establishment of military factories producing weapons<\/a> and spare parts, some of which were later redirected to meet civilian market demands.<\/p>\n

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In the early 1970s\u2014specifically after the 1973 October War\u2014a new phase<\/a> in the relationship between the military and the economy began to emerge. That period saw the launch of what became known as the National Service Projects Organization (NSPO)<\/em>, officially established in 1979<\/a> as a military-affiliated institution designed to support the armed forces\u2019 needs for goods and services without full reliance on the state\u2019s general budget. Over time, however, the NSPO expanded<\/a> its activities to include sectors such as agriculture, food manufacturing, and logistics services.<\/p>\n<\/blockquote>\n

Under former President Hosni Mubarak, although this expansion continued, the military\u2019s economic role remained relatively limited, confined to specific sectors, and it did not directly compete with the private sector or major civilian companies.<\/p>\n

The landscape began to shift gradually<\/a> after the January 2011 revolution, during a period of political and economic instability. At that time, the armed forces emerged as the most organized and disciplined institution capable of maintaining state functions. Its economic involvement began to widen under the pretext of protecting food and strategic security and compensating for the absence of effective civilian institutions. The military oversaw the distribution of essential goods, managed struggling public companies, and executed urgent service projects to contain growing public anger.<\/p>\n

The most significant and radical transformation came after 2013<\/a>, with President Abdel Fattah El-Sisi\u2019s rise to power. The military entered a new phase of economic empowerment\u2014not merely as an implementer of state projects, but as a leading economic actor in its own right. It now owns its own companies, operates its own sectors, and holds the authority to oversee mega-projects. During this period, the military\u2019s activities expanded into new sectors including real estate, construction, new urban developments, food industries, energy, fuel stations, commercial services, and transportation.<\/p>\n

Additionally, the Armed Forces Engineering Authority<\/em> became the state\u2019s largest contractor, with extended powers to plan and execute the country\u2019s biggest national projects\u2014including the New Administrative Capital<\/em> and the National Roads Network<\/em>.<\/p>\n

By this stage, the Egyptian military was no longer just a partner in the economy<\/a>\u2014it had come to represent a unique model of state capitalism, as described by researchers at the Carnegie Middle East Center. In this model, the military stands at the top of a production and marketing structure that intersects with state institutions and, at times, surpasses the private sector in its ability to access resources, facilities, and strategic influence.<\/p>\n

\n

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Restructuring Capitalism<\/strong><\/h3>\n

The military\u2019s post-2013 economic expansion was no coincidence. It was tied to deep<\/a> political, economic, and security dynamics that redefined the army\u2019s role in Egypt\u2019s governance and economy. When President Abdel Fattah el-Sisi assumed power\u2014after two years of severe political and economic turmoil\u2014it marked a clear shift toward empowering the military not just as a guarantor of regime stability, but as the primary engine of national economic reconstruction and a vehicle to restore public confidence in the state\u2019s ability to deliver basic services.<\/p>\n

\n

In this context, the military became the political leadership\u2019s refuge amid chronic bureaucratic inefficiency and the private sector\u2019s reluctance to invest in an unstable environment. While markets stagnated and foreign capital fled, t<\/a>he military maintained clear institutional advantages: discipline, mobilization capacity, vast resources, and an integrated logistics network. The state turned to the army as a reliable strategic partner capable of executing massive national projects at record speed\u2014without being hampered by the bureaucratic and legislative hurdles that often stall civilian investment.<\/p>\n<\/blockquote>\n

Behind this project-management role, however, lay deeper motives tied<\/a> to rebuilding Egypt\u2019s economic model. From the state\u2019s perspective, it was no longer acceptable to remain hostage to market fluctuations or the influence of business elites who had gained enormous power over the past decades. Thus, the military\u2019s economic expansion emerged as part of a project to restructure \u201cstate capitalism,\u201d positioning the armed forces at its helm, with the state reclaiming the upper hand in planning, production, and distribution.<\/p>\n

There is also a clear political dimension<\/a> to this expansion. The military\u2019s strong economic presence has reinforced its institutional standing\u2014not only as a security apparatus, but as a powerful economic actor with control over funding and execution of megaprojects. In this sense, military economic power has become a tool of governance, helping to ensure the loyalty of state institutions and diminish any alternative economic or political forces that might challenge the existing order.<\/p>\n

Authorities have justified the military\u2019s economic expansion by citing the need to fill an \u201cinvestment vacuum\u201d in sectors deemed commercially unviable by the private sector, such as developing Sinai, border regions, and national road networks. The armed forces presented themselves as a reliable investor and project executor in these areas\u2014capable of securing strategic sites without resorting to loans or foreign partnerships that might compromise national sovereignty.<\/p>\n

\n

This wave of military economic expansion has redrawn the relationship between the Egyptian state and the private sector. The private sector now operates in a space where political and economic spheres intersect and where traditional market principles\u2014such as competitiveness and partnership\u2014are redefined by state priorities. While the government publicly affirms its commitment to private sector empowerment, in reality, the relationship is more complex: a blend of cautious cooperation and structural inequality.<\/p>\n<\/blockquote>\n

Since 2013, there has been a growing trend of the state\u2014particularly the military\u2014replacing the private sector in many lucrative or strategic economic areas, especially those involving food security, energy, and infrastructure. The government views the army as an \u201cefficient executor\u201d to be deployed when private investors hesitate due to risk or lack of market confidence.<\/p>\n

President el-Sisi has repeatedly articulated a vision in which the state must intervene when necessary to stabilize the economy and ensure service provision. However, as noted in a Carnegie Center study<\/a>, this contradicts the fundamentals of free-market economics and creates an environment hostile to genuine competition. When the military enters civilian markets with tax exemptions, logistical privileges, and regulatory autonomy unavailable to private players, it distorts the playing field and clouds the business climate.<\/p>\n

Some in the government have argued that the military\u2019s involvement in certain sectors is only temporary\u2014meant to \u201cfill the gap\u201d until the private sector is ready to take over. In recent years, steps have been taken to open some military-owned assets to private investment or partnerships, notably through Egypt\u2019s sovereign wealth fund, and through proposals to partially list companies like Wataniya<\/em> and Safi<\/em> on the stock exchange or offer shares to strategic investors. These moves have been interpreted as signs of a possible rebalancing between the state and private sectors.<\/p>\n

Still, many economists argue that these steps do not necessarily indicate a retreat from military-led economics. Rather, they may represent a reconfiguration\u2014an expansion through partnership rather than withdrawal. The military is not merely an executor or project supervisor\u2014it owns assets, runs companies, and plays a leading role in economic strategy. It is a dominant actor, unlikely to be easily bypassed or outcompeted.<\/p>\n

At the same time, both domestic and foreign investors have voiced concerns about the Egyptian market\u2019s structure. Competition with state-owned enterprises\u2014particularly those under military control\u2014is seen as high-risk and opaque. A 2020 World Bank report warned that the expanding economic role of the state could hinder the entry of new investors, constrain the private sector\u2019s effectiveness in driving sustainable growth, and limit its capacity to create jobs.<\/p>\n

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The Military as a Business Conglomerate<\/strong><\/h3>\n

Over the past decade, the Egyptian Armed Forces have expanded their influence to encompass most vital economic sectors, managing a vast network of companies and megaprojects either directly or through affiliated agencies. This expansion has positioned the military as one of the country\u2019s most powerful economic actors.<\/p>\n

Construction and Infrastructure<\/strong>
In the construction and infrastructure sector<\/a>, the military serves as the main contractor for the state\u2019s flagship projects. For instance, a company affiliated with the Ministry of Defense holds a 51% stake in the New Administrative Capital project east of Cairo, which Reuters estimates to cost $45 billion. Since 2014, the Armed Forces Engineering Authority has been entrusted with numerous major projects, including nationwide road networks, social housing, and hospital upgrades\u2014projects valued at over $1 billion\u2014capitalizing on what is often described as its \u201ccapacity for rapid execution and high quality.\u201d One of its most high-profile achievements in this domain was the establishment of Egypt\u2019s largest cement factory<\/a> in Beni Suef in 2018, with an unprecedented production capacity, despite the market already being saturated.<\/p>\n

Industry and Consumer Goods<\/strong>
In industry and consumer goods, the Ministry of Military Production oversees around 20 factories and companies<\/a> producing a wide range of civilian goods alongside military equipment. One example is the Helwan Company for Metallic Appliances (Factory 360)<\/a>, which shifted from manufacturing cannons to producing refrigerators and cookers. Other army-run factories have expanded into chemicals, fertilizers, steel, and medical devices, all operating under the National Service Projects Organization (NSPO), which markets its products under the \u201cMade in Egypt\u201d label.<\/p>\n

Food and Agriculture<\/strong>
In the food and agriculture sector<\/a>, the army runs the company Safi<\/em>, which bottles water and cooking oils and was one of the first military-owned companies offered for investment partnership. The military also launched massive fish farming operations, including the Ghalioun Pond project in Kafr El-Sheikh\u2014hailed upon its 2017 inauguration as one of the world\u2019s largest<\/a>. It has also expanded into cattle breeding and dairy production, launching the Silo Foods<\/em> industrial complex in Sadat City in 2021 to produce food supplies for schools and consumer markets. Additionally, a chain of food retail outlets under the Future of Egypt<\/em> organization (affiliated with the Air Force) was set up to distribute subsidized commodities. Media reports have sparked widespread controversy over the military\u2019s potential involvement in the attempted takeover of Juhayna<\/em>, a leading dairy and juice company, following the arrest of its founder, Safwan Thabet, and his son, amid accusations of forced divestment from key sectors.<\/p>\n

Energy, Services, and Transportation<\/strong>
In the energy and services sector, the armed forces operate a network of gas stations through Wataniya Petroleum<\/em><\/a>, which has significantly expanded since its founding in the early 2000s and is now one of Egypt\u2019s most prominent fuel providers. A partial stake in the company is currently being offered as part of the government\u2019s privatization program. In transportation, military-run companies execute road and bridge projects and operate bus lines in some cities during peak times. The government has also entrusted them with developing dry ports and logistics hubs, such as cold storage warehouses.<\/p>\n

Mining<\/strong>
In the mining sector, Law No. 198 of 2014 grants<\/a> the Ministry of Defense authority to approve the exploitation of mineral resources and collect royalties on mining operations. Through affiliated companies, the military has invested in marble quarries, gold mining, black sand extraction, and other natural resource industries.<\/p>\n

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International Pressure for Transparency<\/strong><\/h3>\n

The Egyptian military\u2019s dominance over vast sectors of the economy has attracted growing interest and increasing criticism from international financial institutions, which have voiced concern over the impact of this expansion on the investment climate, the efficiency of resource allocation, and the fairness of market competition.<\/p>\n

On multiple occasions, the International Monetary Fund (IMF)<\/a> has explicitly expressed these concerns. In its 2017 report, the IMF warned that the involvement of entities affiliated with the Ministry of Defense in economic activity could weaken the private sector\u2019s ability to grow and hinder job creation. During the $12 billion loan program from 2016 to 2019, the IMF tied its support to reforms aimed at empowering the private sector by reducing the role of state-owned entities\u2014including those owned by the military.<\/p>\n

In the latest program negotiated between the Egyptian government and the IMF in 2022\/2023<\/a>, amounting to approximately $3 billion, the agreement included unprecedented conditions requiring the integration of military-owned companies into the civilian regulatory framework. The deal stipulated that all state-owned enterprises, including those under the Ministry of Defense, must submit semiannual financial statements to the Ministry of Finance and publish them for public access. It also required full disclosure of any financial or regulatory support or privileges granted to these companies.<\/p>\n

The IMF also called for expediting the process of listing some military companies on the stock exchange or opening them up to strategic investors, to improve governance and boost confidence in the economy. Among the entities expected to be offered are the water company \u201cSafi\u201d and the fuel company \u201cWataniya,\u201d although implementation has progressed more slowly than anticipated.<\/p>\n

The World Bank<\/a>, while using more cautious language, has been no less direct in its conclusions. In recent reports, it confirmed that the level of private investment in Egypt\u2014about 6% of GDP\u2014is among the lowest globally. It urged the removal of barriers that hinder investor access, particularly the unfair competition posed by state-owned and military-run companies. The Bank also expressed support for Egypt\u2019s \u201cState Ownership Policy Document,\u201d which aims to identify sectors from which the state will gradually withdraw in favor of the private sector.<\/p>\n

Transparency and anti-corruption organizations have been even more outspoken. In a 2020 statement, Human Rights Watch called on the IMF to link any financial support to Egypt with full disclosure of the military\u2019s economic activities. The organization described the continued operation of military-owned companies in total secrecy as a serious obstacle to fiscal reform and a direct contributor to a fragile business environment.<\/p>\n

Most of these assessments converge on a single point: achieving sustainable and equitable economic growth in Egypt requires reducing the military\u2019s economic role and subjecting its operations to the principles of transparency, accountability, and fair competition.<\/p>\n

\n

While the Egyptian state has shown limited willingness to open up, the slow pace of implementation and lack of transparency around reform efforts have raised broad doubts about the seriousness of change. With economic pressures mounting, the stance of international institutions remains a real test of the government\u2019s ability to rebalance the relationship between the state and the private sector\u2014moving away from military exceptionalism toward an economy governed by market rules and accountability.<\/p>\n<\/blockquote>\n","protected":false},"excerpt":{"rendered":"

Zawia3 investigates Egypt\u2019s military-driven economy, revealing exclusive privileges, forced conscript labor, and the impact on private sector collapse\u2014backed by testimony, data, and international warnings.<\/p>\n","protected":false},"author":11,"featured_media":12962,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"om_disable_all_campaigns":false,"footnotes":""},"categories":[410],"tags":[11368,11358,11383,11363,11370,11378,11385,11376,11364,11384,11367,11381,11359,11357,11379,11375,11361,11377,11369,11380,11360,11382,11374,10262,11365,11373,11371,11362,11372,11366],"kateb":[710],"class_list":["post-12961","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investigations-en","tag-army-business","tag-army-economic-control","tag-army-vs-private-sector-in-egypt","tag-army-run-businesses","tag-conscript-labor","tag-conscript-labor-in-construction","tag-economic-consequences-of-military-expansion","tag-economic-role-of-egyptian-army","tag-egypt-investment-climate","tag-egypt-military-economic-dominance","tag-egypt-military-economy","tag-egypt-new-capital-military","tag-egypt-private-sector-challenges","tag-egyptian-military-economy","tag-imf-criticism-of-egypts-economy","tag-imf-egypt","tag-imf-egypt-military-reform","tag-military-companies-in-egypt","tag-military-dominance","tag-military-interference-in-civilian-sectors","tag-military-owned-companies-egypt","tag-military-run-businesses-in-egypt","tag-nspo","tag-private-sector-egypt","tag-saafi-wataniya-ipo","tag-safi","tag-sisi-economy","tag-state-capitalism-egypt","tag-wataniya","tag-world-bank-egypt-private-sector","kateb-zawia3-com"],"jetpack_featured_media_url":"https:\/\/zawia3.com\/wp-content\/uploads\/2025\/05\/\u0627\u0642\u062a\u0635\u0627\u062f-\u0627\u0644\u062c\u064a\u0634-2.png","_links":{"self":[{"href":"https:\/\/zawia3.com\/en\/wp-json\/wp\/v2\/posts\/12961","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zawia3.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zawia3.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zawia3.com\/en\/wp-json\/wp\/v2\/users\/11"}],"replies":[{"embeddable":true,"href":"https:\/\/zawia3.com\/en\/wp-json\/wp\/v2\/comments?post=12961"}],"version-history":[{"count":2,"href":"https:\/\/zawia3.com\/en\/wp-json\/wp\/v2\/posts\/12961\/revisions"}],"predecessor-version":[{"id":12981,"href":"https:\/\/zawia3.com\/en\/wp-json\/wp\/v2\/posts\/12961\/revisions\/12981"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zawia3.com\/en\/wp-json\/wp\/v2\/media\/12962"}],"wp:attachment":[{"href":"https:\/\/zawia3.com\/en\/wp-json\/wp\/v2\/media?parent=12961"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zawia3.com\/en\/wp-json\/wp\/v2\/categories?post=12961"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zawia3.com\/en\/wp-json\/wp\/v2\/tags?post=12961"},{"taxonomy":"kateb","embeddable":true,"href":"https:\/\/zawia3.com\/en\/wp-json\/wp\/v2\/kateb?post=12961"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}