In February, President Abdel Fattah al-Sisi issued a decree to direct the Armed Forces Land Projects Agency (AFLPA) to oversee construction of two of Egypt’s mega-projects to be built on 16,000 acres under military control: the new capital city and Sheikh Zeyad’s new urban community. The decree granted AFLPA the power to form joint ventures.
The move is indicative of the political direction increasingly taken by Egypt’s authorities to expand the Armed Forces’ involvement in the economy. This military involvement does not only take the form of oversight and contractual management, but increasingly is articulated through the formation of joint venture investments wherein the military allocates desert land under its control – land whose value is expected to appreciate markedly – to companies affiliated with the Armed Forces, as a capital investment.
Does allowing the AFLPA to form joint ventures signal a major transformation in the military’s role in Egypt’s economy?
In December 2015, before the Parliament’s official assembly, Sisi issued a decree to amend Law 53/1981 that set out the governing framework of the AFLPA. Sisi’s amendment allowed the agency to expand its commercial activity and form for-profit corporations, both on its own and jointly with national and international capital sources. The mandate is similar to that which formed the National Service Projects Authority (NSPA), which was established by Law 32/1979 and owns and manages around 21 companies engaged in diverse commercial activities including food commodities, fertilizers, cement, mineral water, building materials and construction.
However, unlike the NSPA, the AFLPA has not historically engaged in investment or commercial activities. It was established in 1981, through the issuance of the desert land law, to receive money from the state’s budget as financial compensation for military land possessed for commercial activities. The financial compensation was to be commensurate with the cost to relocate military infrastructure. The recent presidential decree completely changes the purpose of the agency to match that of the NSPA by allowing it to form for profit joint stock companies. Commentators expect that the move is a legal and structural decision to prepare the agency to use military land as capital in joint venture investments.
It is true that the desert land law and Law 17/2001, concerning strategic areas, already granted the Ministry of Defense broad discretion over land allocated for defense purposes, even allowing it to change the land’s use to a commercial purpose. However, the significance of Sisi’s decree is twofold.
First, it establishes a legal framework to allow the Armed Forces to use desert land as an investment. Egyptian jurisprudence’s historical attention to national defense has led to the consolidation of desert lands under the control of the Armed Forces. Most desert land fell under the control of the Armed Forces in the 1950s and 1960s. At the time, desert land had little economic value, as Egypt’s population was concentrated in the Nile Valley and the Delta – a situation that has completely changed over the last three decades. Economic and population growth have become increasingly dependent on expansion into Egypt’s once uninhabitable deserts. Expansion has taken the form of land reclamation and housing projects, new industrial cities and tourist attractions. The development of each of these initiatives is contingent upon access to affordable desert land, which the government has been able to provide using the compensatory framework of the original desert land law: the Armed Forces is paid for the utility costs incurred during its relocation. However, in reality, the state and the military, often indivisible, have used desert land to acquire economic gains, either through the outright sale of land or through the recent practice of using land as a capital investment in urban development companies.
Second, the recent presidential decree changes the way in which the Armed Forces use desert land. Access to desert land has allowed the NSPO to transform Egypt’s transportation infrastructure through the construction of roads, overpasses and tunnels. However, now – as evinced by the government’s projects in the administrative capital and the Suez Canal channel, as well as in affordable housing – the Armed Forces have pivoted and will commence a foray into urban and industrial projects as well as logistical services. The move may augur AFLPA’s more frequent use of its land possessions as capital investments in joint ventures with Arab and international investors.
However, this move is not without significant problems, notably the indeterminate space the government and military will increasingly occupy. How will they negotiate their requirement to safeguard public and national security and the financial gains they stand to gain by issuing land sale tenders and implementing urban development projects? The unprecedented alliance between Egypt’s political leadership and the Armed Forces can only be seen as making allowance for the abuse of power.
Further, it is unclear which legal framework would govern joint ventures between the AFLPA and private corporations. As a military institution, the AFLPA is governed by military law. Will these joint ventures fall under the jurisdiction of trade and investment laws? If there is any ambiguity, private investors may push to secure ownership over the land assets.
Egypt must find a way to use its available economic resources in a wise manner and with development goals in mind. Egypt’s desert land, which constitutes 95 percent of the country, is principal among these resources. It must be used to benefit the largest segment of the population, not as a revenue-generating asset for state and military institutions.
The failure of the state’s land use strategy in the past several decades may be reemerging in our present moment. During that time, state institutions, which include the military, have desired to quickly generate financial revenue using their control of large swaths of Egyptian land. The Egyptian government has tried to extract the largest possible value from investors, driving up the price of the land. Or, as was the guiding mission of the New Urban Communities Authority (NUCA), the state has implemented development projects that have focused on tourism resorts along the North Coast. The NUCA was established at the end of the 1970s and has been responsible for the construction of the Marina and Maraqiya tourism developments. While these initiatives have generated short-term economic gains, they have proven costly for Egypt’s economy in the long run. The opportunity cost for the establishment of these “concrete summer villages,” which are occupied for only a couple of months each year, is the lost possibility of undertaking industrial, agricultural and urban development projects along the North Coast.
This narrow vision continues to govern the Armed Forces’ economic agencies. The military’s aim to harness its power over the state bureaucracy and its drive for greater access to investment opportunities in the Egyptian market will have long term repercussions on the country’s economic and social development.
This article has been translated and edited for clarity. You can read the original Arabic here.