What remains after the state’s capture of the Future of Egypt?

This week’s discussion in the House of Representatives regarding the draft bill to reorganize the Future of Egypt Authority is a significant occasion. This is not because the draft bill introduces any novel economic philosophy, but because it represents a faithful translation of the approach governing the Egyptian economy since 2014: an approach characterized primarily by the expansion of the armed forces into roles that should ideally be performed by the public and private sectors.

The outcomes of this approach are plain to see. One needs only to look at the government’s own data on growth rates, the increasingly rentier nature of the economy, mounting domestic and foreign debt, soaring inflation, and the fact that nearly a third of the population now lives below the poverty line. If these are the results of this policy in the past, it is inconceivable that continuing down the same path—as this draft bill clearly intends to do—will yield any different outcomes.

The ideas presented in this article are offered to Egyptian public opinion and to members of the House of Representatives. While the opening debate on the bill revealed some consensus around key amendments, the discussion was, in my view, rushed. More time should have been allocated to addressing the core philosophy of the bill.

Nevertheless, it is not too late to return to this debate, particularly as parliament moves to discuss the specific articles of reorganization in Chapter 2 of the bill, specifically Articles 2 and 3.

Article 2 defines the authority as an entity of a “special nature” under the president, endowed with “technical, financial, and administrative independence.” Meanwhile, Article 3 defines its aims as “strengthening the economic power of the state” while maintaining due regard for national security, sustainability, and social justice, with a particular emphasis on food, water, and energy security.

A characteristically Egyptian response

The timing of the draft law is critical to understanding its underlying motive. Introduced on the heels of the IMF’s seventh review, the bill addresses the fund’s reservations over how the Egyptian economy is run. The 2016 IMF agreement, however, explicitly called for loosening the military’s grip on the economy. Yet this legislation merely shifts structural oversight of the authority from the minister of defense to the president. It is a characteristically Egyptian response to international pressure: formally feigning compliance while leaving the underlying reality untouched.

The IMF’s message is clear: Egypt must transition to a market economy while keeping social protection measures in mind. Yet nothing that has occurred in the country since 2014 convinces economists or citizens that this transition has actually taken place.

The draft law before the House of Representatives expands the authority’s footprint, granting it control over state financial resources through proposed sovereign and services funds. Furthermore, broader measures regarding military-owned companies signal no intention to open a path for the Egyptian private sector to manage businesses where continued armed forces’ control lacks strategic justification, particularly given their negligible contribution to Egypt’s GDP growth.

A prominent example is the deal struck to give TAQA, owned by Ahmed Heikal and others, a stake in a new company that will replace Wataniya, which operates fuel distribution stations. According to published reports, TAQA’s share will not exceed 10% of the new company’s capital, though it could rise to 25% after several years if the other partners, who will own 90% of the capital, agree.

Land reclamation, pasta manufacturing, and private universities are no place for the armed forces

I am not taking a stance on the IMF’s call to make room for the private sector, but this is what the Egyptian government signed up for in the 2016 agreement and repeatedly affirmed its adherence to. What Egyptian economists and private-sector business leaders are demanding is that the government’s actions match its commitments, whether in its agreement with the IMF or as articulated in the recent amendments to the State Ownership Policy document.

The bill currently before the House of Representatives is clear evidence that the pattern of economic management in Egypt will not change in the coming period. Nor is there anything to suggest that the Future of Egypt Authority has demonstrated that its management of the assets transferred to it has outperformed its predecessors.

When Future of Egypt officials were given the opportunity to convince the public of their track record, they failed, prompting the president to point out the inadequacy of their presentation.

What has the true cost of the authority’s projects been since its inception? What has it achieved based on the goals set for it, assuming those goals were ever clearly and specifically defined? And what was its method for achieving these targets: was it by reclaiming new land, or by incorporating land already reclaimed by Egyptian citizens?

I have not come across any response from the authority to such complaints.

What the state left for the government

Reservations about the armed forces’ expanding role in managing the economy are not categorical, nor do they imply a lack of patriotism. No economist who has addressed this issue objects to the military owning weapons factories or even to its participation in certain infrastructure projects.

However, engaging in land reclamation projects, managing bakeries and pasta factories, aquaculture, owning television and radio broadcasting companies, and now establishing universities like the recently announced Kayan University: this is where reservations arise. This is not an appropriate domain for the armed forces.

Adam Smith, the founder of classical capitalist economics, argued that the modern economy relies on specialization and the division of labor, viewing them as the path to prosperity. Specialization leads to the accumulation of experience, skill, and knowledge of production conditions, as well as learning how to navigate them. This is the path that capitalist nations have historically followed.

Of course, there are serious reservations about the market economy. Most notably, Hungarian-born economist Karl Polanyi demonstrated how a market economy generates numerous crises, degrades income distribution, and spreads unemployment, necessitating state intervention through a transition to what is known as the welfare state. This model is seen in most capitalist countries, particularly Germany, France, and Britain. Personally, I prefer the social market economy model, of which the Scandinavian countries were once the premier examples.

Furthermore, even on strategic matters—including military strategy—civilian experts, academics, and former diplomats have historically made the most decisive contributions. Consider George Kennan, the former US ambassador to Moscow who formulated the post-WWII containment strategy, or Henry Kissinger, who was a Harvard professor before becoming National Security Advisor and Secretary of State.

Indeed, most recent US National Security Advisors have been civilians, from Zbigniew Brzezinski under Carter to Condoleezza Rice under Bush, both of whom came from academia. Whatever one's view of their policies toward the Arab world, they earned authority in their own countries through scholarly expertise rather than military rank.

In its new form, the Future of Egypt Authority will perform roles already designated to existing ministries, but it holds an advantage over them by virtue of answering directly to the president. Its mandate in reclaiming and cultivating land is already the domain of the Ministry of Agriculture and Land Reclamation, which has extensive institutional experience. Importing wheat was previously, and successfully, managed by the Ministry of Supply and Internal Trade.

Meanwhile, the call for the authority to play a role in food, water, and energy security intersects with the jurisdictions of the ministries of irrigation, petroleum, and renewable energy, while attracting investment is the mandate of the Ministry of Investment.

Why, then, do we sacrifice the capabilities, expertise, and knowledge accumulated by these ministries and state bodies in favor of a body that has yet to prove its specialization in sustainable development issues, and will inevitably be forced to rely on these very ministries to execute its tasks?

Undoubtedly, there are other issues surrounding these amendments that warrant discussion, but the scope of this article does not allow for them. I may return to them on future occasions.

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*The Arabic version of this article was published on July 13th. On July 14th, the House of Representatives gave final approval to a government-drafted bill regulating the Future of Egypt Authority for Sustainable Development, sending it to President Abdel Fattah El-Sisi for ratification.