Elliott Abrams

Pressure Points

Abrams gives his take on U.S. foreign policy, with special focus on the Middle East and democracy and human rights issues.

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Will the Army Save Egypt’s Economy?

by Elliott Abrams
May 6, 2014

The success of the most likely winner of the Egyptian presidential election, Gen. Abdel-Fattah el-Sisi, will in the medium- and long- run depend on his ability to revive the Egyptian economy. It’s already clear that the Army wishes to crush all internal opposition–not just from the Muslim Brotherhood, but from the liberal, secular, moderate, and democratic forces within the society. So the Army does not plan to win popularity through respecting citizens’ rights and their dignity. Does it plan to win popularity through rapid economic growth?

If that’s the plan, there is thus far no evidence of it. As Deutsche Welle suggested yesterday,

While privately owned companies struggle under the burden of overall chaos and political insecurity, the army appears to have been unaffected. According to some observers, the army is indeed profiting from the crisis. Over the past months, the government in Cairo has commissioned construction companies operated by the military to carry out several large infrastructure projects. In November, Interim President Adly Mansour had issued a decree allowing the government to skip the tender process when placing an order – companies run by the army have largely profited from that move….

Estimates differ on how much of Egypt’s economy is controlled by the army – figures range from 5 to 60 percent. The country’s defense budget, and other figures that could shed light on the army’s true power, are kept secret. What is clear, however, is that the army has its hands in every single important sector – from pasta production, to manufacture of furniture and television sets, to oil production and infrastructure projects. The army owns hospitals and Red Sea tourist resorts, and has taken a leading role in agriculture. These army-owned companies are usually headed by retired military personnel, who earn well privately in addition to collecting their public pensions….However, army personnel in suits generally lack business expertise. In order to stay competitive, the army had to resort to other measures: Their companies usually don’t have to pay taxes, they profit from massive subsidies and can turn to enlisted personnel as cheap labor.

This is no formula for economic growth, but it’s easy to see how difficult Sisi would find it to curtail the military privileges that so greatly enrich the officer corps and the Army as an institution. Perhaps he’ll surprise us all after his inauguration, but I wouldn’t bet on it. He has already talked about an austerity program, but note who is being asked for austerity:

Egypt’s youth is its hope; they need to give and not expect to take anything now….Egypt needs a lot from us. Egypt’s youth should not be thinking about when will they be able to get married or when will they ‘live’, they need to build the country first. Our economic situation is extremely difficult, right now we can’t ‘want’ anything, we should only ‘give’ to Egypt….Before breakfast, before you put a piece of bread in your mouth, think what you have done for Egypt today.

This is general, broad appeal, and an appeal to Egypt’s youth. Nowhere is there an appeal to the army to prepare for austerity and prepare to lose some of its many economic privileges.

And this is what separates Egypt from the cases where an authoritarian government–Singapore under Lee Kuan Yew, Pinochet’s Chile, Taiwan and South Korea under military regimes–produced considerable economic growth. They did not have armies that controlled huge chunks of the economy, and the military had no reason to fight off real economic reform.

Egypt’s case is different, and considerably worse. If Sisi takes on the military’s economic empire, he will have a tough battle on his hands–and one in which the United States and other friends of Egypt should back him. But there are few indications that, after a career in the army and as the beneficiary of its economic role, he is willing to undertake this task.

 

Post a Comment 4 Comments

  • Posted by Neville Craig

    Worryingly this sets a fresh precedent for Turkey, as the battle of Islamic populism between Erdogan and Gulen works its course.
    It might even be better if Turkey’s disciplined army again steps in

  • Posted by Sluggh

    Near Tahrir Square is a well-tended park. Its bushes are manicured into geometric shapes. Its trees provide precious shade in the city center. But a wrought-iron gate denies entrance to ordinary Egyptians. The park belongs to the army.

  • Posted by EMT

    Dear Mr Abrams, you wrote that the success of the most likely winner, Gen. Abdel-Fattah el-Sisi will depend in the medium- and the long-run on his ability to revive the Egyptian economy. In my view, Gen. Abdel-Fattah el-Sisi will succeed, not in the medium-run, but in the long-run, as he has to stabilize the security of Egypt first. In the long run, he may succeed better than anyone else, as we could see until now that his behavior was a calculated risk and he had clarity about what he was doing. He realized that the Obama Administration did not support him in chasing the Muslim Brotherhood government and did not see that Morsi was leading Egypt in a direction towards radical Islamism.

    Morsi had already organized groups in the Sinai, along with Hamas, to attack the Egyptian army. I believe that the Israelis have warned el-Sisi about this, and made him aware. The Obama Administration did not see this and wanted Morsi to finish his term as president. This is in line with today’s position of the US government that Iran is not a threat and they should have their nuclear development, as long as they don’t make weapons, and that they should be trusted. The US purposely does not insist that Iran withdraw its threats against Israel, or at least, this is how it seems.

    In reference to the economy, in the long term, Egypt will be helped by a few nations, among which, the Gulf States, Saudi Arabia, and Israel, and this will open the doors for the Europeans to step in economically as well. Maybe not intentionally, but in fact, the US pushed Egypt towards Russia, Saudi Arabia and the Gulf States.

    According to the news I read so far, Israel foresaw this situation, the same way it now sees the threat Iran poses as being very real. But the Obama Administration is different from the four previous administrations.

    El-Sisi is well aware of the situation of the Egyptian youth and will certainly, with the help of his friends, find a good solution for involving them in the economic growth of the country. Meanwhile he has the support of the intellectual and industrial segment of the population.

  • Posted by EMT

    Revised comment

    The Egyptian Economy the Election

    I believe that Gen. Abdel-Fattah el-Sisi has a greater chance to win the elections, than his adversaries, as he has proven to the Egyptians that he is a capable man. I believe that the people like him, as they saw that he saved the country from becoming a fanatic religious country like Iran. The economy is now suffering and the entire industry is stagnating. In my view, Abdel-Fattah el-Sisi is able to revive the Egyptian economy if he follows his close neighbor Israel, which is a vibrant country and has an excellent economy. As president, the General will succeed in the long run. In the medium run, he has first to stabilize the security and give the country a good direction. He may succeed better than anyone else as we could see until now that his behavior was a calculated risk and he had clarity about what he was doing. He realized that the Obama Administration did not support him in chasing the Muslim Brotherhood government because it did not see that Morsi was leading Egypt in a direction towards radical Islamism.

    Morsi had already organized groups in the Sinai, along with Hamas to have leverage in case he needed it, to be able to successfully attack the Egyptian army in the Sinai Peninsula. Those operations in the Sinai, once in a while directed against Israel, have made Israel aware and led it to increase its vigilance and to check out what was going on in the Sinai. They found different groups of terrorists operating with the help of Hamas. I believe that the Israelis have probably warned their neighbor army on what was going on with these groups, and made it aware. The Obama Administration did not see this and wanted Morsi to finish his term as president. In my view this is in line with today’s position of our government that Iran is not a threat, that they should have their nuclear development continue, as long as they don’t make atom bombs, and that they should be trusted, as per Susan Rice, according to today’s news. The US purposely does not insist that Iran withdraw its threats against Israel, or at least, this is how it seems.

    In reference to the economy, in the long term, Egypt will be helped by a few nations, among which, the Gulf States, Saudi Arabia, Israel and Germany, and this will open the doors for other Europeans countries to step in economically as well. The US pushed Egypt towards Russia, Saudi Arabia and the Gulf States. Maybe not intentionally, but in fact.

    According to the news I read so far, Israel foresaw the situation in Iraq, the same way it now sees the threat Iran poses, as being very real. We should not forget that Israel is dealing with democratic states. But the Obama Administration sees it differently from the four previous administrations. Over the years, Obama was saying to the Israelis and to the Saudis that everything would be on the table. Today I found out that Susan Rice had a meeting in Israel with Netanyahu and what she told him created a deep divide between the Obama Administration and Israeli Prime Minister Binyamin Netanyahu on the Iranian nuclear situation. I just hope that Obama will keep his word towards the Middle Eastern countries.

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