Egypt plans to float army-owned businesses on the stock exchange

CAIRO (Parliament Politics Magazine) – Egypt plans to put army-owned enterprises on the stock exchange by the end of the year as part of a drive to involve the private sector in managing state-owned assets.

Egypt’s plan to privatise state-owned businesses isn’t new, but has been repeatedly postponed.

President Abdel Fattah al-Sisi announced on April 26 at the Egyptian Family Iftar Banquet in Cairo that he has directed his government to launch a programme for participation of the private sector in state-owned assets worth $10 billion annually for four years, as well as the listing of army-affiliated companies on the stock exchange.

Sisi did not specify the type or number of Egyptian army-affiliated enterprises that will be listed on the stock exchange.

Ayman Soliman, the head of Egypt’s Sovereign Fund, informed the Asharq Business site on April 21 that two army-owned companies, Wataniya Petroleum and the National Corporation for Natural Water in Siwa, are being readied for public and private placement in the stock market of Egypt before the summer.

Egypt is amidst an economic crisis, which has been exacerbated by Russia’s war in Ukraine. As a result, Egypt devalued its currency by 15%, and officials are currently in discussion with the IMF about an Egyptian request for urgent financial help for overcoming the war repercussions. 

According to Yezid Sayigh, a senior associate at the Carnegie Middle East Centre, Sisi’s general effort to reduce the state’s financial burden by raising capitalisation of government-owned companies and monetisation of state agencies and assets includes listing army-owned companies on the stock exchange.

Sayigh, whose research focuses on the comparative economic and political roles of Arab armed forces, as well as the effect of war on societies and states, does not see a substantial or straight link between Egypt’s current financial situation and Sisi’s instructions, despite the fact that Sisi has long advocated for the listing of military companies on Egypt’s stock exchange.

Meanwhile, Egypt’s government is preparing to declare this month its intention to withdraw from a variety of economic areas in order to boost the participation of the private sector.

In his speech on April 26, Sisi stated that in the coming stage, he will strengthen support for the private sector in order to boost its role in the country’s economic growth, adding that all available resources will be allocated to create the required atmosphere.

Sisi has started enormous national infrastructure projects since taking power in the summer of 2014, the most notable of which being the construction of a new capital in the desert east of Cairo.

All this while, the Egyptian army owns dozens of businesses in a variety of industries, including manufacturing and service. According to a December 2020 study by the world bank group, 60 army-affiliated enterprises operate in 19 of the 24 industries covered by the Global Industry Classification Standards in Egypt.

The National Service Projects Organisation, a Ministry of Defense-affiliated firm which is known for providing military and civilian products and contracting services and is regarded as the army’s economic arm, alone oversees over 30 businesses in the petrochemical, construction, mining, food, and materials industries.

Given the army’s great impact as the country’s most powerful institution, economic analysts and businessmen think that the army’s competition with the private sector in the economy causes unfair competition and obstructs the flow of foreign investments.