‘One-third of Egypt’s economy under army control’

Published Feb 20, 2011


The Egyptian military played a crucial role in the ousting of President Hosni Mubarak and has promised to steer the nation towards democracy. What’s little known outside Egypt is that the army plays a crucial role in the economy as well. That raises the question: Will the military back reformers if they threaten to dismantle its business interests?

The armed forces have a substantial stake in Egypt’s civilian economy through a host of government-owned service and manufacturing companies, at least 14 of them under the auspices of the Military Production Ministry. Military-run companies are in such businesses as janitorial services, household appliances, pest control and catering.

El Nasr for Services and Maintenance, for instance, has 7 750 employees in such sectors as child care, automobile repair and hotel administration, according to its website. Other military companies produce small arms, tank shells, and explosives – as well as exercise equipment and fire engines.

These companies add up to “a very large, unaccountable, nontransparent military”, says Robert Springborg, a professor in the department of national security affairs at the Naval Postgraduate School in Monterey, California, and author of Mubarak’s Egypt: Fragmentation of the Political Order. The generals “will try to massage the new order so that it does not seek to impose civilian control on the armed forces”, he says.

“It’s not just a question of preserving the institution of the army. It’s a question of preserving the financial base of its members.”

As much as one-third of Egypt’s economy is under military control, says Joshua Stacher, an Egyptian-military expert and assistant professor at Kent State University in Ohio. Revenues from military companies are a state secret, along with the armed forces budget, he says.

It isn’t uncommon for governments and militaries to own or run their own defence-related industries and arms makers. In Singapore and Israel, for example, nationalised production of fighting hardware is seen as a way to protect national security by avoiding dependence on foreign arms contractors.

What sets apart the Egyptian military, the Arab world’s largest, is that its companies also offer an array of products or services in the domestic consumer economy – and without any civilian oversight.

The latest assessment of defence production and military companies in Egypt from defence information firm IHS Jane’s in London, and a 1998 report produced by the US Embassy’s commercial affairs section in Cairo, list three military-owned businesses that sell to both the armed forces and the public.

One of these is El Nasr, which operates under the brand Queen Service. It has at least 18 service businesses, according to its website.

General Ahmed El-Banna, general manager of El Nasr, says the military owns 75 percent of the company while the rest is held by retired officers. Two other consumer companies were named by the reports: El Nasr for Intermediate Chemicals, whose website says it produces chemicals, fertilisers, industrial and medical gases, and household pesticides; and Arab International Optronics, a maker of lenses and advanced optical equipment.

The Ministry for Military Production lists on its website more than a dozen “military production companies”, including Abu Zaabal for Engineering Industries, Benha for Electronic Industries, and Maadi for Engineering Industries.

Abu Zaabal was established to secure the armed forces’ artillery needs, according to the website. It also produces water and fuel tanks.

Maadi makes parts for medical and agricultural equipment as well as home appliances, radiators, and exercise equipment. Benha owns factories and produces telecommunication equipment, microwaves, and personal computers. The Egyptian Tank Plant makes red firefighting vehicles.

The armed forces’ business interests would be at risk if demands for opening up the economy ran too deep, said Samer Shehata, an assistant professor at the Edmund A Walsh School of Foreign Service at Georgetown University in Washington, before Mubarak stepped down.

“If the military was completely removed from politics, then there is no question that these interests would be put in jeopardy.”

Military companies also play a significant role in consumer food production, says Springborg, the Naval Postgraduate School professor. The military runs “chicken farms, dairy farms, horticultural operations. And it of course has its own bakeries,” he says.

The military’s “business interests are very large”, says Bassma Kodmani, executive director of the Paris-based Arab Reform Initiative and a senior adviser at the French National Research Council.

Those businesses, though, help build the nation and keep capital within its borders. “The army is not seen as corrupt,” she told a group of reporters in Paris last week. “It might seem strange to people in the West, but in Egypt it’s not considered shocking that the army builds highways or new housing projects.”

The bottom line: The Egyptian military, which runs a large network of businesses, will defend those interests if they are threatened by reformers. – Bloomberg

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