Recently published research from Business Monitor International, "Egypt Defence & Security Report 2016", is now available at Fast Market Research
[USPRwire, Fri Apr 01 2016] Heightened domestic security issues - namely those associated with Islamic State, the Muslim Brotherhood, civil unrest as well as continuing regional tensions - will be the major concern for Egypt over 2016, and this will in turn see to a strong rise in defence expenditure over the year. The majority of Egypt's current spending will however, continue to be focused on anti-terrorism capabilities and the procurement of advanced weaponry from overseas suppliers as opposed to the development of a domestic defence manufacturing sector. As al-Sisi's military regime attempts to ensure its grip on power, we expect defence spending to maintain its upward trajectory albeit to a lesser extent as the years go on, owing to broader fiscal constraints given the country's weak economic outlook. Furthermore, high personnel costs - given the large armed force's size - and endemic corruption will also continue to draw funding away from modernisation efforts.
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In March 2016, Egypt's parliament agreed to USD3.7bn in French loans to finance armament procurements from France. The money will reportedly go toward a variety of equipment and hardware across the Navy, Army, and Air Force.
In February 2016 Egypt received three new Rafale fighter jets from France. According to Egypt's Al Ahram weekly, Egypt already received three Rafale fighter jets in July; the remaining 18 will be delivered in batches within the next two years.
Demonstrations amongst the Egyptian youth continue in the Nile Delta, which we suspect has the potential to be the Achilles heel of the al-Sisi's regime. The collective punishment of entire communities in the Sinai also places the army at risk of losing the battle of hearts and minds against extremism.
Al-Sisi extended the state of emergency in North Sinai by three months in January 2016, closed the Rafah border crossing, established a buffer zone, and cancelled talks with Hamas after several car bombs in 2015. Cancellation of the talks with Hamas for a long-term ceasefire with Israel does not bode well for lasting stability on Egypt's eastern frontier. In addition, claims that Sinai based jihadist group Ansar Bayt al-Maqdis has links with the Islamic State, have proliferated over the course of 2015 and we see little sign of the group abandoning its conflict with the Egyptian government over 2016. These drivers have given Egypt a continued need for equipment to manage civil unrest and terrorism threats.
Given rising concerns over the presence of Islamic State we expect a normalization of the defence partnership with the United States over the course of 2016.
Egypt is leading a military campaign involving its Navy and Air Force which expected to last throughout the first half of 2016 against extremist terrorists in Eastern Libya, which Egypt views as a direct threat to its western border.
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