Egypt’s political economy has operated on three basic principles for the past few decades. Firstthe country’s political authorities set strategic economic goals from the top down. Secondthe power elite supports the political authorities and in turn closely monitors domestic and foreign investment to generate revenue and employment opportunities as well as private benefits. ThirdEgyptian citizens voluntarily or involuntarily submit to this power-sharing, which mainly benefits the political authorities and power elites in exchange for improvements in their livelihoods.
Since 2014, President al-Sisi has adhered closely to these principles, but has increasingly relied on Egypt’s military networks (part of the power elite) to fuel economic growth. This strategy has produced short-term gains – informal jobs and a range of consumer goods – at the expense of long-term economic prospects. In particular, the economic influence of the military has deepened some of Egypt’s structural problems: low productivity, inequality, informal unemployment and a suppressed private sector. This limits the sustainability of the current economic model. To improve Egypt’s economic prospects, the role of the state – particularly the military – in the economy must be reduced by reducing the number of associated companies and relaxing the regulatory framework. However, this is almost impossible to achieve in sectors where the military already has a dominant profile, such as construction and mineral extraction, since its support is essential to keep al-Sisi in power. A more promising alternative for European policymakers to consider is lobbying the Egyptian government to limit military influence in sectors with growth potential where the military is largely absent, such as B. Manufacturing and Information and Communication Technology (ICT). A government strategy that discourages further military involvement in these sectors, creates a regulatory framework that encourages private investment, and invites foreign financing can help Egypt achieve greater economic growth and higher tax revenues.
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