Magazine article The Middle East

The Generals Guard Their Economic Empire: Egypt's Military Leaders Are Not about to Let Democracy Get in the Way of Their Business Interests. Cam McGrath Reports from Cairo

Magazine article The Middle East

The Generals Guard Their Economic Empire: Egypt's Military Leaders Are Not about to Let Democracy Get in the Way of Their Business Interests. Cam McGrath Reports from Cairo

Article excerpt

The largest standing army in Africa receives a $1.3 billion annual stipend from Washington yet hasn't fought a war in nearly 40 years. Egypt's ageing generals often rattle sabres at their traditional enemy, Israel, but have used the idle decades to carve out an empire at home. Flush with cash and exempt from oversight, they have annexed large tracts of the Egyptian economy and fortified their business interests behind opaque budgets and national security privileges.

The military establishment has dominated Egyptian politics since a group of army officers deposed the country's last monarch in 1952. All four presidents have hailed from military backgrounds, and a council of high-ranking officers has run the country since Hosni Mubarak was toppled during a popular uprising in February 2011. Under Mubarak, a former air force commander, the top brass maintained a low political profile, confident that the authoritarian president--who traded his khakis for swanky pinstripe suits--would look after their interests. This left the generals free to build their economic empire, running unregulated factories, taking kickbacks on government contracts, and amassing fortunes by selling off state land. Details of the military's commercial activities are shrouded in secrecy, though estimates put its share of the economy at between 10% and 40% of GDP. With billions at stake, the military elite is deeply suspicious of any attempt to dilute the power and privilege it has accumulated over the last 60 years.

"We won't allow anyone, whoever they may be, to come near the projects of the armed forces," Major General Mahmoud Nasr, the deputy defence minister for financial affairs, told one local newspaper.

Military, Inc.

Robert Springborg, a professor of national security affairs at the Naval Postgraduate School in the US, likens Egypt's military to a business conglomerate he describes as "Military, Inc." He says the generals command "variegated ownership participation ... in virtually every sector of the economy."

The oldest commercial ventures are factories run by the Ministry of Military Production, an umbrella for three separate holding companies with dozens of subsidiaries.

The companies are known to produce military hardware as well as a wide range of consumer products, from bottled water and olive oil to electric cables and kitchen appliances. The generals also run cement factories, gas stations and refineries, ports, resort hotels and construction firms.

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Since the 1990s the military has broadened its portfolio through partnerships with Egyptian and foreign companies. In many cases these joint venture companies occupy the premises of wholly owned military firms, sharing their subsidised inputs and tax exemptions.

Springborg says the third rubric of military enterprises is the most camouflaged. It is common practice for senior officers, upon retirement, to be appointed to head public sector companies and private firms, or to serve on their boards. The companies appear on the surface as normal commercial entities, but embedded military officers "are able to draw on their network of connections to obtain contracts, typically with the military, but also with the government."

Egyptian military-run companies enjoy a number of advantages over their private sector counterparts. They are exempt from government oversight, do not pay taxes, breeze through bureaucratic red tape, and receive preferential treatment in bidding for state contracts. …

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