BMI's Executive Summary

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Domestic politics continued to loom large in Egypt in Q407. While the government and President Hosni Mubarak's ruling National Democratic Party (NDP) remain firmly in control and are presiding over a period of encouraging economic growth, its hard line against political opposition may be storing up trouble for the medium term. Members of the Muslim Brotherhood (MB) hold one-quarter of the seats in Parliament, yet this did not stop the organisation from being subject to ongoing arrests and harassment. There were signs that MB was linking up with the secular opposition to resist the government's privatisation programme. BMI's view is that the economic reform programme is firmly in place and political opposition is not strong enough to deflect it. However, the medium-term wisdom of harassing peaceful opposition groups has to be questioned – during the quarter the government also arrested leaders of the small Shi'ite community in the country, closed down a human rights lobby group, and imprisoned independent newspaper editors who had speculated about the President's health. While there were no major actions during the quarter by those advocating violent change in Egypt, the authorities did say in October that they had prevented a car bomb attack on a pro-democracy lobby group, allegedly organised by extreme Islamists in a group calling itself Takfir and Higra.

The threat from Islamist groups has re-emerged after a lull from the late 1990s until 2004. A series of bombings in the Sinai Peninsula has highlighted the security risk throughout the country. The attacks are unpopular amongst most Egyptians because their consequences are two-fold: firstly, they may prove to damage Egypt's valuable tourist industry, and secondly, they are leading to the further isolation of the Bedouin people as the government undertakes suppressive security operations in the areas. Internationally, Egypt is seeking to maintain strong relations with the US (from which there is quiet pressure to reform), improve relations with China to create a possible counter-weight to its reliance on the US, and play a larger role within the region, especially with regards to the Israel/Palestine conflict. Egypt welcomed the US attempt to re-launch the Middle East peace process with a conference in Annapolis.

Egypt is a major recipient of US foreign military aid, which it uses to acquire largely US-made military equipment as part of Cairo's bid to modernise its armed forces. Whilst Egypt lacks a substantial armaments design industry, it remains one of the most prolific manufacturers of military equipment in the region. However, its defence industry remains limited to co-production deals, again, primarily with the US. Egypt's military expenditure is likely to remain constant providing Cairo remains in Washington's favour. That said, European companies have been increasingly breaking into the Egyptian defence market over the last few years, and stronger ties with China could see the end of dependency on the US.

Cairo and Washington share many of the same beliefs regarding Egypt's security concerns. US pressure for political reform in Egypt remains limited because the US does not want another Islamist government to emerge in the region. The US bolsters Mubarak's government through explicit support and extensive financial and military aid. As a result, discontent from the Egyptian side regarding US foreign policy in the region is rarely reflected in Cairo's official stance. Whilst Washington will be happy to maintain the status quo, Mubarak will have to work hard in order to keep a grip on his side of the relationship.

Chapter 1 - Executive Summary

SWOT Analysis

Egypt Political SWOT

Egypt Security SWOT

Egypt Defence Industry SWOT

Egypt Economic SWOT

Egypt Business Environment SWOT

Chapter 2 - Political Overview

Domestic Political Outlook

The Gamal Mubarak Question

A Separate Political Identity

Making Himself Unpopular?

Economic Implications

External Political Outlook

Relations With Hamas Shaky But Sustainable

The Lebanon Fallout

Hizbollah Enjoying Popularity Surge

Building Links with Beijing

Beijing Popular As Counterweight To Washington

Border Security Risk

Consequences For Egypt Of A US Attack On Iran

Chapter 3 - Security Risk Analysis

BMI’s Security Ratings

Risk Ratings

Table: Regional Risk Ratings

Table: State Terrorism Vulnerability Index

Regional Security: The Middle East And North Africa

Inter-State Conflicts

Internal Conflicts

Egypt Security Risk Ratings

Egypt Conflict Risk

Egypt Terrorism Risk

Egypt Physical Safety Risk

Chapter 4 - Security Overview

External Threats

Israel-Palestine

Risks To Sinai From Iraq And Gaza

The Nile

Internal Threats

Table: Egypt Insurgent Groups

Terrorism

Bombs At Sharm El-Sheikh

The End Of Calm

Cairo’s Response

Chapter 5 - Market Structure & Defence Industry

Armed Forces

Table: Regional Armed Forces (including conscripted) 2006

International Deployments

Table: Egypt Foreign Deployments

Weapons Of Mass Destruction

Market Overview

Arms Trade Overview

Imports

Exports

Industry Trends And Developments

Table: Key Players – Egypt Defence Sector

Procurement Trends And Developments

Table: Egypt Defence Sector US Excess Defence Articles Offered (2003)

Chapter 6 - Industry Forecast Scenario

Egypt – Defence Sector Historical Data & Forecasts

Table: Egypt Defence Sector – Government Expenditure

Key Risks To BMI’s Forecast Scenario

Chapter 7 - Macroeconomic Forecast

Private Consumption Picks Up At Last

Table: Economic Indicators

Chapter 8 - Company Profiles

Profiles – Multinational Companies

General Dynamics

General Electric (GE)

Raytheon (Egypt)

Profiles – Domestic Companies

Arab Organisation for Industrialisation (AOI)

Ashmand International

Chapter 9 - BMI Forecast Modelling

How we generate our industry forecasts

Defence Industry

Sources

Chapter 10 - Appendix A: Risk Ratings Methodology

Conflict Risk Methodology

Terrorism Risk Methodology

Physical Safety Risk Methodology

Overall Risk Rating

State Vulnerability Index

Competitive Landscape for MEA Defence & Security: Sample of  
Companies Ranked

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Rankings and Competitive Landscapes by production and sales; market share and change on previous year; number of employees, ownership structure and year established. Also includes analysis of company expansion, export and investment strategies.

Network of Defence & Security Sources

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BMI's Middle East & Africa Defence & Security Reports are based on an extensive network of multilateral organisations, government departments, automotive industry associations, chambers of commerce and company reports. Information sources include: