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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.

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.


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.


They also have free use of public infrastructure and assets, including valuable state land. Vast fortunes have been made carving up Egypt's so-called military zones..

The construction firms they hire to complete the work--also military owned--typically use materials from military factories and work crews comprised of conscripts. "Military commanders determine what army conscripts do, which means that they have about 250,000 conscripts at their disposal," says Springborg. "This essentially amounts to a free labour force."

The spoils of Tahrir

The Arab Spring was a watershed event for Egypt's top brass. For nearly a decade, Gamal Mubarak--the former president's son and presumed successor--and his business associates had pursued neoliberal economic policies and sweetheart privatisation deals that clawed away at the military's business empire. The popular uprising that toppled Mubarak ended all succession scenarios and left the generals in charge of the national economy.

"They didn't plan it, but in hindsight the revolution worked out well for them," says student activist Mohamed Fathy. Contrary to the notion that Egypt's military rulers have bumbled their way through the post-Mubarak transition, the Supreme Council of the Armed Forces (SCAF) has taken calculated steps to extend the army's tentacles into nearly every civilian institution and secure its economic interests. Senior officers have been appointed to key positions in industry, real estate and media. Legislation has been issued that outlaws many forms of popular protest, including labour strikes.

Meanwhile, Fathy points out, the public's demand for social justice has provided a convenient cover to neutralise business rivals. In a showy anti-corruption campaign, state prosecutors have targeted the coterie of Gamal Mubarak while passing over business tycoons with strong links to the military.

The government's corruption watchdogs, headed and staffed by former army officers, have shown considerably less interest in opening the military's dossiers. The army's operating budget and its public and private sector corporate ledgers are deemed classified state secrets. Even IOUs to the state treasury go unrecorded. The generals have staunchly refused calls for transparency and accountability. Last November the SCAF attempted to ram through a charter that would have enshrined the military's special powers and privileges in a new constitution. The document was shelved after drawing fierce opposition, particularly over articles that would keep the army's budget off-the-record and under its direct control.

It was an ephemeral victory for protesters. The dissolution of parliament by a court order in June removed the only democratically elected institution in a position to contain the military's power. The generals are now free to handpick a constitution and define presidential authorities, ensuring the military will remain at the ore of whatever regime emerges from Egypt's chaotic transaction. "It could take years to develop the capacity to subordinate the military to civilian control," says Springborg. "Challenging the army now would be political suicide."
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Title Annotation:Current Affairs/EGYPT
Comment:The generals guard their economic empire: Egypt's military leaders are not about to let democracy get in the way of their business interests.
Author:McGrath, Cam
Publication:The Middle East
Geographic Code:7EGYP
Date:Jul 1, 2012
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