Horn Of Africa Sisi’s Egypt Moves from Military Economy to Family Firm

Sisi’s Egypt Moves from Military Economy to Family Firm

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When Egyptian President Abdel Fattah el-Sisi seized power in 2013, he inherited a military economy under the control of the officer corps and primarily serving its economic interests. He immediately began transforming it into a securitized economy, one in which the entire economy is subordinated to the military and security services. This has involved transferring rent capture to military and intelligence officers, empowering the military and intelligence services to spend public funds, and deinstitutionalizing elite control over the commanding heights by substituting family connections for institutional and professional ones.

In the 1950s and 1960s, the primary purpose of the military economy was to manufacture weapons and circumvent arms embargoes. It was not essential to Nasser’s coup-proofing strategy, which relied on his personal relationships with those in the high command and on security and intelligence services as counterbalances. Military enterprises were limited in number and size and did not produce civilian goods.

Nasser’s successor, Anwar Sadat, expanded the military economy, initially as part of the broader opening of the economy in the wake of the 1973 war, subsequently to diversify military enterprises into production of goods for civilian use out of both coup-proofing and economic motives. Sadat’s successor, Hosni Mubarak, needed more material resources to sustain an increasingly expensive military. He expanded economic opportunities for military personnel while having military enterprises produce an ever-wider array of goods and services for the domestic civilian market, supplanting concern for military preparedness.

An Economy Dominated by the Securitized Deep State

Yezid Sayigh and others have documented the phenomenal growth of the military economy under Sisi. This expansion privileged the military and its enterprises in state contracting; rendered the military even more immune to civilian oversight; increased the state’s role in the economy through costly megaprojects; induced foreign enterprises to enter into business relationships with the military and companies controlled by it; encouraged the military to assume new commercial roles in rent generating economic sectors; and extended the jurisdiction of military courts over Egyptian civilians.

These policies have disempowered competitors in the political economy. The civil service has been tarnished through a series of orchestrated corruption scandals. The erstwhile glitterati elite have lost business to military enterprises and faced legal action to induce them to make financial contributions to the regime. Technocrats and prominent commentators have had their regular columns and media appearances reduced or cancelled. Local government is run by centrally appointed executives, many of them with military or intelligence backgrounds, and the educational sector has been brought under centralized control, with the military even operating primary and secondary schools.

This marginalization of competitors has fostered a more authoritarian, military-dominated state. At the same time, the way that Sisi has effected these changes has left frailties in the military economy.

Deep State Dynamics

The product of a petit bourgeois family, Sisi believes in self-help, exercise, and hard work as the keys to health, well-being, and economic success. For Egypt to succeed as a nation, in his view, Egyptians must pick themselves up by their bootstraps according to the instructions form a paternalistic, guiding force, which the military embodies.

In implementing this approach to governance, Sisi has reconfigured the deep state, both structurally and personally. Comprised of the military, presidency, and security and intelligence services, Egypt’s three-legged deep state has since the Nasser era been dominated by the military. Presidents Nasser, Sadat and Mubarak counterbalanced the military by bolstering the security and intelligence services, producing a gradual civilianization of the inner core of the regime. Military Intelligence lost its original preeminence to the General Intelligence Directorate (GID), which, although staffed largely by military officers, falls under the president, not the minister of defense.

Former presidents also bolstered the Ministry of Interior so as not to rely on the military to perform critical control and surveillance functions. The Central Security Force (CSF) was strengthened into a parallel, if weaker, army. State Security and State Security Investigations were granted expanded surveillance capabilities and worked alongside GID to police and manipulate the political arena, and even to assume a counterterrorism role in North Sinai.

This changed with Sisi. He had less need than his predecessors to counterbalance the military with the GID and Ministry of Interior forces. The 2011 protests weakened State Security Investigations and led to a purge and name change to the National Security Agency. In 2013, Sisi turned to Military Intelligence to organize the Tamarud civilian protest movement against the Muslim Brotherhood-led government of former president Mohammed Morsi, providing justification for Morsi’s ouster in July of that year. Military Intelligence went on to organize pro-Sisi forces for parliamentary and presidential elections in 2014.

This marked the apogee of the influence of Military Intelligence. The two weaker legs of the intelligence triangle, GID and the NSA, were strengthened, with all becoming involved in managing the political economy, typically running parallel networks. Each has ensured the election of loyal deputies to parliament, and Military Intelligence and GID both played a role in the 2018 presidential elections and the 2019 constitutional amendment campaign. The role of Military Intelligence in civilian affairs has shrunk, in favor of monitoring the officer corps and overseeing the counter terrorism campaign.

These organs separately and collectively have expanded and deepened their networks of control into the political economy to a far greater extent than was the case prior to 2013. Holding companies also illustrate a careful balancing act between the elements of the deep state. Military Intelligence formed the Falcon Group, headed by General Sharif Khalid, a former officer in Military Intelligence. In 2016 it signed a contract with the Civil Aviation Authority to provide security at Egypt’s main airports, and two years later formed Tawasul for Public Relations, which in turn took direct control of Hayat Television. With several newspapers also taken over through Tawasul, this gave the Falcon Group, and hence Military Intelligence, a significant share of print and electronic media.

GID has a parallel holding company, Eagle Capital, through whose subsidiary, the Egyptian Media Group, it controls sixteen media outlets, including ON TV. Apparently divided between Military Intelligence and GID is Qala’a Holdings, investing in sectors dominated by the military, such as air and maritime transport, oil and gas, fertilizer and cement production.

Military Intelligence and the GID have also founded or acquired companies they own outright and into which their officers are parachuted, typically at the end of their careers. GID owns some 70 percent of the country’s internet provider capacity. It is a key player in the gas sector, and invests in tourism and real estate in the New Valley and on the north coast. Military Intelligence and GID are developing economic networks that provide them sources of capital and employment autonomous from the military’s principal economic organizations, such as the National Service Projects Organization, the Arab Organization for Industrialization, and the military’s Engineering Authority.

Family Firm

This carefully structured competition and collaboration between security organs tells only part of the story of how Sisi has extended his control over the political economy. He has relied on blood relatives as well as very close associates, tied to him by personal bonds originally forged in the military. He put a military academy classmate in charge of the Administrative Control Agency (ACA) in 2015, then abruptly replaced him in 2018. This extended greater authority to his son Mustafa, who was transferred from Military Intelligence to the ACA. The ACA has acquired vast powers to interrogate, seize evidence, and prosecute corruption in virtually any sector other than the military.

His other sons have been sprinkled into key positions in security agencies. Mahmoud, who like his father served in Military Intelligence, was shifted to GID, where in 2018 he became the principal figure. He took over numerous files formerly in the hands of the NSA. His director of communications within the GID was his brother Hassan, who Sisi transferred into the organization from a state-owned oil company. The two brothers played key roles in their father’s 2018 presidential election campaign and in the constitutional amendment referendum that followed. In November 2019 Mahmoud was unceremoniously removed from the GID and dispatched to Egypt’s Moscow embassy, apparently for having aggrandized significant powers at his father’s expense.

In addition to Sisi’s sons, Sisi placed his brother in charge of the unit in the Central Bank that investigates money laundering. In that capacity he nominally reports to Tariq Amer, the Director of the Central Bank and son of Nasser’s long serving Minister of War, Abd al-Hakim Amer, but in reality is able to monitor the flow of money, public or private, into and out of the country.

The Egyptian state has traditionally been an institutionalized enterprise, where the strength and coherence of its military and other institutions rendered kinship connections of secondary importance. Nasser, for example, was careful to marginalize his son Khaled, who spent much of his life outside Egypt. The role of Sisi family members in vital security and financial agencies is indicative of the deinstitutionalization of the Egyptian state.

Implications of Securitization for the Political Economy

Sisi’s tightening of control is inimical to the country’s economy and to the smooth functioning of the deep state. Growth rates lag, foreign direct investment stagnates, job creation slows, poverty afflicts a record third of the population, and even the wealthy consider leaving Egypt. As the securitized economy expands, it not only crowds out the private sector, it is itself increasingly hobbled by the president’s coup-proofing need to set the different legs of the deep state against each other, thus militating against their potential coordination.

No economic plan or overall structure guides this competitive tension between the elements of the ever-expanding deep state. Sisi’s economy is project rather than program driven, so incites competition within the deep state to gain backing for megaprojects and the contracts and other rewards they generate. This dictates the need to launch yet more such projects, whatever an economic cost-benefit analysis might reveal. As the economic consequences of the pandemic intensify, so too will there be ever greater strain on the elements of the deep state as they jockey for position.

One cost of this competition spiral is the military’s combat capacity. The failure to subdue a small force of Islamists in North Sinai is indicative of the overall deficiencies of the Egyptian Armed Forces, which from the early Mubarak era has been distracted by its economic role. As this role continues to expand, and as it becomes more complex and competitive with the economic activities of the various security agencies, it will drain ever more energy and attention from combat preparedness precisely when security challenges, such as those posed by Libya and Ethiopia, are intensifying.

Sisi’s family firm style of rule is a recipe for ever increasing political tension, not only between the actors in the deep state, but between the deep state and society as a whole. Tension will result from the marginalization of economic sectors such as the civil service, media, education, and health, as well as from inadequate economic growth and the unequal distribution of the benefits of that growth. Rising poverty rates and informal employment indicate that this process is underway. The future portends an ever more fractious deep state at war, at least figuratively, with the society it governs. As the Sisi family becomes yet more entrenched and powerful, and possibly internally disputatious, so will the prospects for meaningful reform recede while those for violent conflict, both internal and external, increase.

Robert Springborg
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