Egypt's generals use power grab to increase their economic clout

Military chiefs place allies in key economic posts and expand their authority over highly lucrative deals, such as the Suez Canal project

PUBLISHED : Monday, 17 March, 2014, 11:30pm
UPDATED : Monday, 17 March, 2014, 11:30pm

In the shadows of a harsh political crackdown, the military that overthrew Egypt's first democratically elected president last summer is positioning itself to become the country's uncontested economic power.

Egyptians have focused in recent months on the likely ascent of military commander Abdel-Fattah el-Sisi to the presidency in the nation's first post-coup election this spring.

But already, the generals have used their July power grab to slip their allies into key economic posts and expand their authority over government development deals, including a lucrative Suez Canal project.

The industries owned by the military have always been a powerful force in the country's economy, though their profits and scope have never been disclosed to the public.

In the years before the 2011 revolution, the military and its businesses sometimes competed for economic policymaking power with the family of ousted autocrat Hosni Mubarak and a handful of oligarchs.

Now, experts say, the Egyptian economy is increasingly shaped by the opaque desires of the ruling generals. And the military's business activities appear to be expanding - from the manufacture of basic items such as bottled water and furniture into mega-infrastructure, energy and technology projects, analysts say.

"We're dealing with a brand new economy that's now run by 'Military Inc'," said Joshua Stacher, an Egypt expert at Kent State University who has studied the military economy.

Three years after Mubarak was toppled during massive demonstrations, Egypt's endemic corruption had not changed, Stacher said - just the order of who you do business with if you want to succeed in the Arab world's largest state.

"In every government authority now, there is a military officer. You deal with him," said Abdel Wahab Mustafa, who imports satellite receivers through the country's ports, where he said military control - and corruption - had come to permeate every aspect of the bureaucracy.

Much about the Egyptian military's role in the economy is unknown - its budget is secret, and its industries are unaudited and untaxed.

Economic experts estimate the military's holdings at anywhere between 5 and 60 per cent of the economy.

A high-ranking military officer, who spoke on the condition of anonymity, said revenue from military industries totalled less than 1 per cent of gross domestic product (GDP) last year.

The officer insisted in an interview that the armed forces were not engaged in corruption. He agreed that the military appeared to be getting more infrastructure contracts than it had previously, but he said that was because "the people trust the final product from the military".

The military has shown a particular interest in the development of the Suez Canal, which is partly a military zone and has long been managed by former military officers.

The Suez Canal Development Project stood to bring in billions of dollars in annual revenue through the expansion of ports to accommodate additional cruise and cargo ships and a vast new industrial zone, said Mounir Fakhry Abdel Nour, the minister of industry, foreign trade and investment.

In January, the Suez Canal Authority - headed by Vice-Admiral Mohab Mamish, a former member of the military council that assumed control in Egypt after Mubarak's departure - named 14 Egyptian-foreign joint ventures eligible to bid on the project's master plan. It will award the contract in October.

But experts say the military's interest in the project makes a fair bidding process unlikely.

Only one of the companies is listed on the Egyptian stock market - the state-owned Arab Contractors, which the country's new military-backed prime minister, Ibrahim Mahlab, headed for 11 years.

Another, the Maritime Research and Consultation Centre, has a board of directors that consists almost entirely of military officers and is chaired by the minister of transportation.

Mamish did not respond to telephone calls seeking his comment.