Abdul Fattah al-Sisi’s vanity projects
Since coming to power, Egypt’s President Abdul Fattah al-Sisi has undertaken various mega infrastructure projects with dubious economic benefits. Despite a worsening debt crisis, these projects remain a government priority. The debt crisis has grown with the percentage of the total debt of the GDP at 101 percent as of the end of 2018 and the cost of servicing the debt reaching 31 percent in the 2016-2017 budgets.
One of the notable challenges of the debt crisis is the budgetary strain of meeting interest payments. This has prompted the government to plan debt restructuring, reliance on longer-term loans, and the issuance of zero-coupon bonds, which have no interest payments and are sold at a major discount. Despite the strain on the budget, the push for mega-infrastructure projects remains.
These projects are touted as essential for the revival of the Egyptian economy, but more importantly serve two important functions. First, they provide the military with additional opportunities to increase its involvement in different aspects of the Egyptian economy.
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Sisi denied this in May 2019, stating that the role of the military in these projects is purely "supervisory". However, recent reports have traced the growth of the military owned firms under President Sisi, particularly military-owned firms involved in mega-infrastructure projects.
Hampering private sector development
The most notable example is the military-owned El Arish Cement Co, which has recently constructed Egypt’s largest cement factory, worth $1 billion. As of 2018, the factory’s capacity for cement production is at 12.6 million tons a year, with Egypt’s production capacity at an estimated 79 million tons. The military had previously stated that these new constructions and new projects would increase the size of the market.
The growth of the military’s economic reach prompted the International Monetary Fund (IMF) to issue a warning in September 2017 that job creation and private sector development "might be hindered by involvement of entities under the Ministry of Defence."
Sisi himself had previously commended the military in November 2014 to deliver mega-infrastructure projects three to four times faster than the private sector – an indication of the intention to rely on the military to implement these projects – which increases its economic power.
Second, these projects serve as a tool of power projection and consolidation of support among regime supporters. The most notable example of this is the extension of the new Suez Canal, which was promoted as an essential alleviation of the economic crisis.
In 2014, the head of the Suez Canal Agency, Muhab Mamish, claimed that the expected revenues are forecasted to reach $100 billion a year. To place this number in perspective, the total size of the Egyptian economy at the end of 2018 reached $249 billion, and the total revenue of the Suez Canal for the same year reached $5.7 billion.
Regime propaganda and empty promises
The Suez Canal extension was mostly financed by the issuance of local bonds, in September 2014, with a 12 percent interest rate. A promotional campaign portraying economic participation as a patriotic duty accompanied this. The project did not deliver the expected benefits, with the revenues of the canal falling in the first few years.
Egyptian people bear the burden of prestige
The largest mosque and church in the country are another example and so is the New Administrative Capital, which Sisi inaugurated in January 2018. The opening of the church was hailed as "vital" for the Coptic community in Egypt. In addition, the mosque was named Al-Fattah Al-Aleem, in a reference to the president. Similar plans include the tallest tower in Africa and the largest museum in the world dedicated to a single civilisation, dubbed "The Grand Egyptian Museum". The museum cost $1 billion and is expected to open in 2020.
Maged Mandour is a political analyst and writes the "Chronicles of the Arab Revolt" column for Open Democracy