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The Egyptian army collects billions in government contracts

January 3, 2014

Egypt bulldozer

The anti-revolutionary crowd love to look at us with incredulous eyes, and ask “but why would the army want to take over power? They have no interest in being in power! They’re better off being independent!”.

Born in outright lie or terrifying ignorance, this argument, naturally, only holds insofar that there’s no proof of the army making financial gains out of their privileged position in power; the nationalistic  slogans placarded over army-built overpasses across the country attempt to convince us that the army is selflessly putting its (unpaid, untaxed, conscripted) labour to the service of the nation.

And, natually, that we should be grateful and stfu.

But occasionally information trickles out, giving us an idea of what kind of money the army is siphoning out of the state’s budget and our taxes — aside from their operative budget, naturally. A few articles published over the past months give us a nice indication of the corruption surrounding state-army financial dealings.

It appears that interim president Adly Mansour issued a presidential decree allowing the state to directly award government contracts in cases of emergency. Which means, circumventing every rule of government procurement.

Because, hey, why go through the pesky process of bidding to pick the cheapest supplier… when you can pick the one in uniform?

And just like that – it appears that every government contract over the past few months has been an emergency..

So over the course of two months – from late September to late November – the army was awarded 7 billion EGP (1 bn USD) worth of government contracts in infrastructure by the council of Ministers. The breakdown is as follows. As you can see, clearly ‘emergencies’ justifying this direct contract awarding:

4.7 billion EGP for 27 bridges and a tunnel

2.2 billion EGP for the Sinai investment plan over FY 2013-2014

357 million EGP for housing projects in El Alrish – 132 buildings

170 million EGP for housing projects in Ras Sedr – 62 buildings.

The on December 21st that the Ministry of Local Development had earmarked 2 bn EGP for slum development projects which will be awarded (surprise, surprise) to the army, as per an MOU to be signed the following week. Another article a few days later detailed some of the ministry’s spending projects, and aside from the slum development, the Ministry also has projected spending another 2 bn EGP to develop 14 train level crossings (مزلقانات) across the country.

And guess who’s doing those? The Army.

Most mind-boggling is how government officials have been justifying these contracts: Minister of Local Development, General (yes…) Adel Labib stated the contracts were awarded to the army “to ensure they would be accomplished promptly and accurately”. The Council of Ministers, when handing its 7 bn EGP to the army, noted they were selected for “their efficiency and discipline in the rapid implementation of projects, all while ensuring the highest quality standards.”

Now there’s some discrepancy on the amounts reported (I’ve read different amounts for the slum development, from 1.4 bn to 2 bn EGP) but it is clear that the army has gone on collecting billions over the past few months.

Continued army rule will ensure checks and balances are further eroded. And this country is clearly going to hell without them.

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9 Comments leave one →
  1. January 3, 2014 12:32 pm

    “allowing the state to directly award government contracts in cases of emergency”

    What was they afraid of? They could have given the army an unconditional power to build anything, you think the Egyptians would have cared?

    Point is, people don’t rise up because of government contracts, they rise up cause of corruption and somehow people are not seeing army as a corrupt yet.

  2. Who permalink
    January 4, 2014 12:34 am

    Great reporting. Thanks. Kudos!

    “And they said we are awake … and aware”

  3. Sarah permalink
    January 4, 2014 5:16 pm

    Everyone doesn’t know this? The military has controlled the economy for a long time, and my supposition was that the take-over was prompted by economics, not politics. Glad you posted this! Might open some eyes.

  4. mohammed permalink
    January 5, 2014 9:25 am

    Very true. But in all fairness the military made roads and bridges are completed faster. Also remember that Egypt failed to run big strategic public sector companies and dumped them for very little money. After the war Mosheer Ahmed Ismaeel proposed to Anwar Al Sadat to make use of the hundreds of thousands of soldiers and have them work in consumer products factories and in construction to be self sufficient and stop being a burden on the Society. Somehow the system works better than the public sector, and employs a lot. So it doesn’t really upset me.

    • January 5, 2014 3:48 pm

      Mohammed, very short sighted view. The army has inherent advantages over the private sector (no taxes, virtually free labour force, and no government oversight). How do you intend to build an economy if you don’t support private enterprise with public money and you award contracts to an entity that pays no taxes while already sucking up approximately 25% of the budget.

      • Ahmed permalink
        January 6, 2014 4:02 pm

        Just want to make things clear because it seems that u all including the article writer himself knows nothing about legal and regulatory issue in Egypt. I am working in project finance in one of the big banks in Egypt and what I am going to say is from real life experience.

        First of all Adly mansour didn’t issue ministerial decree as mentioned in the article. The government is allowed to deal with private sector through 2 laws being the bidding and tendering law no 89 and PPP law no 67 both of which takes very long time and lengthy process to award projects to any non governmental body. The only case that these processes are not requires as per law when the projects is awarded to governmental entity. So Adly mansour didn’t made anything exceptional.

        Secondly
        I don’t know if any of u is coming from and economic background as myself, but for any one who understand basics of economics would know that one of the means to stimulate economy is government spending in infrastructure projects which has to be done ASAP which justifies why the government can’t go through the tendering process to private sector and must be awarded to governmental entity. In our case, the army would be the best option for mainly 2 reasons being the army is not as corrupt as other governmental contractors and has the capability to deliver projects with higher quality standards evidenced by many previous projects which u must have seen if u are living in Egypt. Also the army will be more capable to raise financing for this projects than any other contractor which will definetly help in completing the project faster.

        Finally, it’s true that the army will not be paying taxes, however the army will be sourcing all of its raw materials like cement and steel and others from private sector companies whom are tax payers. Accordingly awarding the project to the army will increase tax revenue to the state and will definitely stimulate the economy without the need to go through the lengthy tendering process given that the army will eventually have to source his raw material from private sector companies

      • January 6, 2014 9:33 pm

        Thanks for all the knowledge you’re dropping on us poor souls who know nothing about egypt or economics.
        Now.
        Adly Mansour did, according to the public sources I quoted, issue such a declaration. That’s seemingly a fact. Not sure why that bothers you.
        Also. Yes, we do know a thing or two about economics. And if you want to do stimuli by government spending you want this spending, logically, to end in the hands of citizens who will in turn be purchasing things, hence getting other citizens to work to produce those things, wel 3agala tedoor. Right?
        Handing this money to the army means that people aren’t getting paid. They’re conscripts, remember? So getting the army to do infra projects to stimulate the economy won’t work as you’re describing.
        Then there’s the claim that they’re buying raw materials. Well, some. But the army also has great vertical integration and supplies much of its own inputs. So that largely counters your argument.

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