Abdullah Hamed-Cairo

Observers in the announcement of President Abdel Fattah El-Sisi to put companies owned by the armed forces in the Egyptian Stock Exchange, and invite Egyptians to contribute to it; a new plan to raise money in support of military companies, so as to avoid a repeat of the experience of investment bonds in the Suez Canal and its burdens.

Unlike Sisi's supporters, who emphasize the positivity of the proposal, observers believe that the regime is forced to take this step under pressure from the International Monetary Fund, especially with the attempt to obtain a new loan from it.

Last week, Egyptian Finance Minister Mohamed Maait said his country had begun new talks with the International Monetary Fund (IMF) to get a new financing package in the hope of reaching an agreement in March.

In October 2016, former Prime Minister Sherif Ismail said the army's role in the economy would be reduced in two to three years.

According to experts, the Egyptian government has diverted international pressure in favor of pumping new investments to army companies out of the pockets of Egyptians, rather than implementing them to serve the Egyptian economy in general.

During the opening of a factory for medical and industrial gases last Thursday; Sisi confirmed that the state is going in the plan to put a number of companies and government assets in the Egyptian stock exchange for three years.

El-Sisi said that the companies that the state is preparing to put on the stock exchange must have an opportunity for the armed forces companies, stressing the importance of providing an opportunity for Egyptians to have shares in these companies, and "to open the door for community participation."


Mysterious economic weight

Among the gains arising from the announcement of the military companies to the stock market, the attempt to preserve the reputation of the national service of the army from the criticism of the recent, for entering a competitor to the private sector, affecting areas of investment such as cement.

Offering companies on the stock exchange requires that they be subject to the laws of the capital market and joint stock companies.

The Egyptian army controls various sectors of the country's economy, and the private sector is competing through 20 institutions, led by the Ministry of Military Production and the engineering body that oversees most infrastructure projects.

Army-owned companies have competitive advantages that make them higher in their current market value, given the lack of labor costs, because many of them depend on the effort of recruits, as well as not being taxed, among several advantages that they prefer from their competitors from civilian firms, which will decrease once they are subjected For the same conditions as civil companies, according to analysts.

Official estimates vary widely about the weight of these companies in the Egyptian economy. In a previous speech to Sisi, he said that the military's role is limited in the economy, equivalent to between 1 and 1.5 percent of GDP, and that the military is not looking to compete with the private sector.

However, military spokesman for the armed forces, Colonel Arkan Harb Tamer al-Rifai said that the armed forces "oversee about 2,300 projects, employing five million civil servants in all disciplines."

The Minister of Military Production, Major General Mohamed al-Assar, said his ministry "achieved in a year (unspecified) revenues of 13.248 billion pounds" (the dollar equals about 16 pounds), without giving further details.


Fund orders

Mustafa Shaheen, a professor of economics at the University of Oakland in the US, believes that the military companies are listed in response to the requests of the International Monetary Fund, and not a free desire of El-Sisi for reform, as it calls for the expansion of the role of the private sector.

Shaheen explained in an interview with Al Jazeera Net that the Stock Exchange has specific procedures that must be subject to the companies at issue, including financial disclosure, and provide financial reports and tax returns periodically, and also obliged to disclose its financial statements and the structure of shareholders and the names of its board of directors, and disclose any material events within it.

Shaheen predicted that the percentage offered by the military companies will not exceed 20% or slightly more, so that the governing percentage of the military establishment, to represent the money of Egyptians new blood in the arteries of these companies, under the sham of financial institutions, such as other institutions; Rights of small shareholders.

He said that the lesson of the January 2011 revolution, the people's sense of power and liberation, and that the country was their country, gave the foundation's leaders the certainty of having the keys to the economy, because it is the country's biggest control.


Positive change

For his part, Egyptian Stock Exchange expert Sameh Abu Arayes considered that Sisi's talk about offering shares of armed forces companies in the stock exchange is a positive change in the way of thinking.

In a Facebook post, Abu Arayes explained that these offerings will provide funding for these companies to expand in a more transparent manner, due to the shareholders control in the General Assembly with the disclosure requirements and payment of taxes, as well as share the citizens in corporate profits.

He stressed that companies benefit from several financing instruments, such as bonds and various financial engineering tools, the establishment of investment funds, and other means to maximize profits.

He pointed out that it could go beyond military projects to the possibility of providing funding for the development of military industries in Egypt, as well as the work of venture capital funds, which finance technological ideas that serve the military industries, as do the US military, for example.

Abu Arayes stressed that the active and developed capital market can serve the economic growth and the development of public and private companies greatly.He wished that talk about the proposals this time would mean a real change in thinking and openness to new ideas, not just words.


Controversy of access sites

With strict conditions for companies to be listed, investors are concerned that the army may create alternative companies to those that will be offered in the stock market, in whole or in part, to compensate for losses from these companies in response to pressure from the fund.

On the other hand, supporters of the regime fear that the withdrawal of the army from strategic investments would deprive Egypt of these vital activities of the country if the private sector fails to manage it.