Introduction Stiftung Wissenschaft und Politik ments German Institute for International and Security Affairs m Co Fragile Alliances in Egypt’s Post- Revolutionary Order WP S The Military and Its Partners Chérine Chams El-Dine The election of Abdel Fattah al-Sisi in May 2014 as Egypt’s President has ushered in a new order. The tacit alliance forged during the rule of Sisi’s predecessor, Mohammed Morsi, between the Muslim Brotherhood and the military had gradually eroded by the end of 2012. Currently, the military and the business elites constitute the core of an emerging tactical alliance, with the Salafist Nour party and secular political forces oc- cupying a secondary position. In the mid-term, the consolidation of the post-July 2013 order will depend first and foremost on the alliance’s capacity to ensure economic re- covery. Secular and Islamist forces have each been forging electoral coalitions to try to win seats in the coming parliamentary elections, which are supposed to take place before the end of 2014. The ouster of President Mohamed Morsi on The Military’s Increased Autonomy July 3, 2013, and the subsequent crackdown The 2014 constitution has made the mili- on the Muslim Brotherhood and its mem- tary an increasingly closed fiefdom, pro- bers marked the official demise of an im- tecting its interests regardless of who fills plicit alliance between the military and the the executive branch. According to it, the Brotherhood, which had characterized budget for the Armed Forces is exclusively the beginning of Morsi’s presidency. Since discussed by the predominantly military then, a new order has been taking shape in National Defense Council (article 203). Egypt, in which the military institution is Similarly, the Armed Forces were particu- occupying a central place. Sisi – who won larly keen on keeping the upper hand in the May 2014 elections with a landslide vic- military affairs and on being consulted on tory against the only rival, the leftist poli- all national security matters. According tician Hamdeen Sabahi – has granted the to the constitution, the National Defense military the status of ultimate arbiter of Council must be consulted by the President the system and supervisor of Egypt’s new before declaring war or sending troops ab- development projects, in addition to its road, and it must also be consulted for draft classic role of national security custodian. laws related to the Armed Forces (articles In 2014 Dr. Chérine Chams El-Dine is a fellow in the project “Elite change and new social mobilization in the Arab world” realized by the SWP Comments 46 Stiftung Wissenschaft und Politik (SWP). The project is funded by the German Foreign Office in the framework of the transformation October 2014 partnerships with the Arab World and the Robert Bosch Stiftung. It cooperates with the Friedrich Ebert Stiftung and the PhD grant programs of the Heinrich Böll Stiftung and the Hanns-Seidel-Stiftung. 1 152 and 203 respectively). The military also mental projects such as wastewater treat- managed to impose article 204 to extend ment and renewable energy. Thus, the pri- the scope of military trials of civilians in vate sector and what is often called the an unprecedented way. Moreover, a transi- military’s economic empire have coexisted tional provision (article 234) stipulates that for the last 30 years. Nonetheless, a clear the appointment of the Defense Minister division of labor has been respected by both must be approved by the Supreme Com- parties, as some economic sectors were con- mand of the Armed Forces over the next sidered the bastions of big business, namely two presidential terms. This strips the chief heavy industries (such as steel and iron), executive (i.e., the President) of his full au- tourism, and telecommunications. thority over the military – as the Supreme Following Morsi’s ouster, the successive Commander of the Armed Forces – and en- (interim) governments awarded the Minis- hances the institution’s autonomy. try of Defense several contracts to carry out infrastructure projects through direct or- der, i.e., without public tenders. These pro- The Military and Egypt’s jects are to be implemented by the AFEA Mega Projects and range from building highways, bridges, With a high budget deficit, reaching 12.6 and low-income housing to renovating pub- percent of Egypt’s GDP (as of 2013–2014 lic hospitals. They also include the Suez pre-actual budget), soaring public debt, and Canal Area Development mega project. growing unemployment, ensuring econom- State officials justify their preference for ic recovery – in terms of higher growth, in- the AFEA over private companies on the vestment, and thus employment rates – is basis of the army engineering corps’ rapidi- imperative for Egypt’s new ruler. Since the ty in implementing projects for the lowest January 2011 revolution, large business cost and with the highest quality. Accord- companies have been reluctant to invest ing to a member of Sisi’s electoral campaign, their money in the country, as the political the military would not crowd out the pri- situation has remained unstable. Thus, fol- vate sector. This is partially true, as most of lowing the demise of Morsi’s rule, the Egyp- these projects are carried out by subcon- tian government and its Gulf allies – Saudi tractors belonging to the private sector. The Arabia, the United Arab Emirates (UAE), and latter’s involvement is essential, as the im- Kuwait – have tried to improve economic plementation of these projects goes beyond development by investing large amounts in the AFEA’s own capabilities. However, this extensive infrastructure projects that could arrangement grants the military a create jobs and boost the economy. In this supervisory role in these projects, and, a context, the Armed Forces Engineering Au- fortiori, over its private sector partners. thority (AFEA) has been Egyptian officials’ Among Sisi’s foreign backers, the UAE most trusted entity for implementing such has also been placing its trust in the AFEA. projects. In October 2013, it signed a grant agree- Actually, the army’s involvement in civil- ment with the Egyptian government to ian infrastructure projects is far from a new finance a number of development projects practice. The Armed Forces started their ci- in Egypt. The agreement stipulates that the vilian economic activities in the late 1970s UAE entrusts the Egyptian AFEA with super- with agrarian projects, land reclamation, vising and/or implementing a number of and civilian public works contracts. They these projects. This is in addition to two then gradually expanded and diversified other projects signed by the Egyptian Minis- their fields of activity through a multitude try of Defense and UAE-based companies of income-generating enterprises, including (Emaar Properties and Arabtec Holding) construction, maritime transport, produc- aimed at building a retail development tion of petrochemicals, as well as environ- and a low-income housing project. SWP Comments 46 October 2014 2 Business Elites: July 2014, Sisi invited 50 businessmen to Indispensable Partners a meeting in which he managed to collect Yet, the intervention of the government more than five billion EGP (US$ 700 mil- and the Gulf sponsors to stimulate the lion) from a number of business tycoons. economy provides only an ad hoc solution Still, businesspeople have abstained from to a chronic issue. Economic recovery will donating substantial sums to the fund – basically depend on the regime’s ability to contributions have remained far below ensure political stability and attract foreign Sisi’s original target of 100 billion EGP and local investment. Thus, the current (US$ 14 billion). The businessmen invited approach favored by Sisi – i.e., the imple- to attend this meeting include independent mentation of development projects under or opposition-linked businessmen (such as military supervision, only involving the Naguib Sawiris), former members of Mu- private sector as subcontractors – is not sus- barak’s National Democratic Party (such as tainable. Mohamed Farid Khamis), and former mem- As a matter of fact, the relationship be- bers of the Brotherhood-linked Egyptian tween Sisi and the business tycoons has not Business Development Association (such as been that smooth, as the latter have been Safwan Thabet). This is a clear indicator losing some of the privileges they enjoyed that Egypt’s new regime is willing to co- under Mubarak. During his first month in operate with all businessmen, regardless office, Sisi made a number of harsh eco- of their political backgrounds, except for nomic decisions. For the first time since Gamal Mubarak’s business cronies (such as 2007, fuel prices were raised during the steel-magnate Ahmed ‘Ezz), as Sisi does not current fiscal year in order to reduce ener- want to be associated with the Mubarak re- gy subsidies by 40 billion EGP (US$ 5.6 bil- gime’s corrupt practices. lion). Without doubt, energy-intensive Sooner or later, Sisi will have to define industries (such as cement, fertilizers, iron, new rules of the game governing access to and steel) run by the private sector were assets and to economic opportunities. He the first affected by the reduction in energy needs the private sector’s involvement in subsidies. In addition, Sisi issued a law the economy (through local investment and amending the tax code to apply a ten per- tax payments) in order to ensure the long- cent tax on stock market proceeds as well term economic recovery he is yearning for, as a five percent tax on incomes that exceed and thus to consolidate his own legitimacy. one million EGP (US$ 140,000) a year (over the next three years). Though private businesses have not Islamist Forces: Quest for Survival voiced opposition to these recent tax hikes The ouster of then President Morsi signaled and the reduction in energy subsidies, they the beginning of a state crackdown on the will be more likely to resist the implemen- Muslim Brotherhood.