Egyptians have recently been glued to their social media following videos of runaway Egyptian businessman Mohamed Ali, circulated widely because of the immense scope of army corruption he has uncovered.

In the videos, allegedly banned by Facebook, Ali, who says that he worked on construction projects with the Egyptian army for 15 years, accused Egyptian President Abdel Fatah al-Sisi of personnel corruption.

Ali’s allegations included details and expenditures for projects he executed for the president, his wife, and various military officials. He said angrily that while al-Sisi kept emphasizing in public that Egypt is poor, al-Sisi’s wife made modifications to one of the presidential palaces that cost more than twenty-five million Egyptian pounds (approximately $1.5 million US).

Ali depicted as “corruption” the armed forces assigning projects by direct order instead of having companies compete through tenders.

Experts say that the Egyptian military owns up to 60 percent of Egypt’s economy.

Since al-Sisi overthrew Egypt’s only democratically elected president Mohamed Morsi in 2013, military-owned business has become more and more powerful.   Experts say that the Egyptian military owns up to 60 percent of Egypt’s economy—a figure that is far above al-Sisi’s repeated claims that the army’s economy comprises only 1.5 percent.

The Egyptian military economy goes way beyond its actual military needs to include numerous products and services that are not necessary for the military to operate. Given the lack of transparency surrounding the army, it is almost impossible to obtain any accurate figures. However, according to this source, the “consensus” of experts and others is that the Egyptian armed forces dominate almost every economic sector.

The Egyptian military also has shares in many government and private companies, especially in the fields of infrastructure. Even senior positions at a number of airports and other executive positions in municipalities have been allocated for several years to retired army generals.

Special Privileges for the Army Only

In 2016, al-Sisi passed a law that exempted the military from paying taxes on goods and raw materials needed mostly in the construction business. This has made big Egyptian businessmen like Najeeb Sawiris wary of doing any business in his own country and ask publicly whether these exemptions should be offered to private businesses as well.

Moukhtar Kamel, a former IMF staffer, said that the law leaves no real competition for private business because it cannot compete with the army, and it is well known that the absence of real competition hurts economies.

“The army’s companies are not only tax exempted, pay negligible labor costs, as they use compulsory draftees as labor with extremely low compensation, but  they also use political power to direct resources to the projects they feel will be most lucrative to them personally.”

“The army’s companies are not only tax exempted, pay negligible labor costs, as they use compulsory draftees as labor with extremely low compensation, but  they also use political power to direct resources to the projects they feel will be most lucrative to them personally,” he said.  

The tax cut for the military not only scares local businessmen such as Najeeb Sawiris, but also foreign investors who feel unsettled by the military’s involvement in civilian activities and who complain about advantages given to firms owned by the military.

Asked if the Egyptian military upper hand in the economy is truly scaring foreign investors, Kamel said, “Yes—with the exception of huge multinational corporations which step into the Egyptian economy to monopolize certain projects that are not necessarily productive for the economy as a whole, or whose social and environmental side effects are negative.” 

Kamel further elaborated: “They are given these monopolies or concessions based on huge commissions they pay to—again—the higher ups. There is also the ‘hot money’ that gets in and out in very short-time trading in the stock market. These are not productive investments.”

The International Monetary Fund warned in Sept. 2017 that private sector development and job creation “might be hindered by involvement of entities under the Egyptian Ministry of Defense.”

The International Monetary Fund warned in Sept. 2017 that private sector development and job creation “might be hindered by involvement of entities under the Egyptian Ministry of Defense.”

Needed Steps to Boost the Economy

The IMF claimed this year that the economic reforms in Egypt supported by a US $12 billion IMF loan, have helped strengthen growth and reduce unemployment.

Yet Kamel argues that the economic situation in Egypt can only improve when the political system is reformed from authoritarianism to a democracy, with accountability mechanisms. 

“A modernized government with real separation of powers is a must,” he said.

 Kamel also suggests some daring steps that are a prerequisite for better economic performance in Egypt.

“To uproot the built-in authoritarianism in a big country such as Egypt, a revolution with a progressive vision is needed, but it is very difficult to materialize.”

“To uproot the built-in authoritarianism in a big country such as Egypt, a revolution with a progressive vision is needed, but it is very difficult to materialize.  Most probably there will be some prolonged period of chaos before something positive may arise. I feel that a French Revolution style reform may be imminent in the country.”

While the military has been enjoying lucrative financial gains from its heavy involvement in the Egyptian economy, a letter leaked from the head of the Egyptian Central Bank shows the astounding figures relating to the country’s debt: it climbed to more than $106 billion US in 2019.  A total of 671 billion Egyptian pounds (upwards of $61 billion US) has been printed with no foreign cash coverage.

In the meantime, while the military continues to benefit mightily from this corruption, the economy is taking a dive, and the ordinary people are suffering. However, a few hundred brave protesters across Egypt have taken to the streets again for the first time since the 2011 Tahrir Square rallies in denouncing the president and calling for an end to his regime. Viral videos posted on social media are again fueling social unrest in Egypt, as they have done since 2018 in Algeria and Sudan. Could this be the start of a new revolution?

Armed with cellphones protesters chant slogans against the regime in Cairo Egypt. Sept. 21 2019 AP Photo Nariman El Mofty

Armed with cellphones protesters chant slogans against the regime in Cairo, Egypt. Sept. 21 2019 (AP Photo Nariman El Mofty)