The Egyptian army's cheap tricks

The Egyptian army's cheap tricks
Comment: An unprecedented study reveals the damage wrought by a system marked by low productivity, secrecy and collusion schemes, writes Jean-Pierre Sereni.
5 min read
09 Jan, 2020
The military's activities are notoriously inefficient, and lacking in transparency [Anadolu]
How did we end up here? Founded some 70 years ago to consolidate the country's recently acquired independence by national hero, Colonel Abdel Nasser, the military industry has become an obstacle to the country's social and economic development and a cancerous growth on society as a whole. 

Yezid Sayigh, a scholar of Palestinian origin at the Beirut Carnegie Middle East Centre, in his "Ownership of the Republic, an anatomy of Egypt's military", tells of the rise of an "officers' Republic" which has greatly accelerated since Abdel Fattah al-Sisi's military coup on 3 July 2013.

His magisterial study runs over 250 pages, and offers a stark contrast with the reports issued by international financial institutions which ignore the subject completely, but also those of the regime's critics who overrate the system's economic weight and underrate its disastrous role in the inner workings of the economy.

Officially, the military industry is under the authority of the Ministry of Defence (MOD) and the Ministry of Military Production (MOMP), to which must be added the Arab  Organisation for Industrialisation (AOI) - an agency created in the 70s with the help of the Gulf monarchies.

It is thought to be worth anywhere between $3-$6 billion, or 1-2 percent of Egypt's GDP. On the pretext of putting to work its idle production capacities, the system produces just about everything, from foodstuffs to household appliances. The military themselves have become gold prospectors in the desert, farmers on the West Bank of the Nile, land use planners, tradesmen, importers and security personnel, to name a few.

Incompetence and a lack of transparency

Is all this production profitable? No one knows, checks on legality are circumvented, independent accountants are kept at bay and there simply is no objective information.

This deliberate opacity does little to conceal the inefficiency of these activities, their feeble production and the incompetence of those in charge. Far from being the super-managers praised by the propaganda, these are generally second-rate industrialists and mediocre economists.

Far from being the super-managers praised by the propaganda, these are generally second-rate industrialists and mediocre economists

The competitiveness of these military firms is even worse than that of the civilian public sector, their workforce is mainly composed of young conscripts deemed unfit for active service, and the technical failures outnumber the successes.

The plans for a "people's car", the Nasr, 100 percent Egyptian, promised over 50 years ago has never made it off the drawing board, and the assembly of fighter planes provided by the US as part of their military aid had to be abandoned, and the planes imported directly.

A social base for the regime's survival

Ever since Marshall Abdel Fattah al-Sisi took power, thousands of retired officers working in the military sector of the economy have come to be among the indispensable mainstays ensuring the survival of the regime. The president has to win their favour with financial, fiscal and social rewards. These high-ranking officers supplement their meagre pensions with jobs that will last them a lifetime, or almost.

Ensconced in every sector of the Egyptian economy, they constitute a huge network of clientelism that is superior to the official circuits, facilitates connections with managers in every sector, and allows the generals and admirals to do just about anything that comes into their heads in a country where the law is approximate, the bureaucracy omnipresent and complexity comes as second nature to civil servants.

The military has at its disposal everything it needs to discourage competitors, deprive them of subsidies, bar them from public procurement contracts - especially with the construction of the new side channel for the Suez Canal - or increase customs duties to penalise overambitious importers. And above all, they have one indisputable advantage: an overwhelming priority of access to land for their different projects - a precious asset in a country as densely populated as Egypt.

Privileged beneficiaries of public funds

The khaki-coloured sector is no longer a carefully limited enclave as it was during Mubarak's time (1981-2011), controlled by the president's cronies, foreign investors or those who profited from the privatisations, all of whom were the military's bête noire.

Today, though, the military is the preferred recipient of public funds; a quarter of the infrastructure budget was allotted to them for digging a second Suez canal, as was the hasty construction of a vast housing project outside the Nile Valley, a scheme dear to Sisi's heart because of his obsession with the "overpopulation problem".

Nearly half the debt incurred by the regime since 2013 has been spent on projects run by the military.

Even more than public finances, it is the economy as a whole that is handicapped by the military sector and its abnormal relationships with the private sector.

Naturally, both sides profit from this, but the ongoing military inroads in areas which have long been dominated by private firms, such as the media, cement production or the steel industry have had game-changing consequences. The entrepreneurs who have connections with the khaki establishment enjoy decisive advantages over those who do not, for overcoming bureaucratic obstacles or using defence facilities, as in Alexandria, where merchant ships are serviced in a naval dockyard.

The military has at its disposal everything it needs to discourage competitors

Conversely, the officers have recently been authorised to create joint ventures with private interests by contributing land, which is an enormous advantage, and while contracting out the actual production to their partners they take a sizeable cut of the profits, thereby putting further pressure on the consumers' purse.

If the current trend continues, Yezid Satigh is no doubt correct in fearing institutionalisation of the military grip on the civilian economy, and the transformation of a group which is already sizeable and powerful, into a market maker or even the very source of the country's economic policies.

But since their ideas remain resolutely "statist", they know nothing of the workings of the market and it is likely that the course of the economy will be more incoherent and unpredictable than ever, despite the officers' boastful slogan: "We are building Egypt, we are feeding Egypt, we are Egypt!"

Jean-Pierre Sereni is a journalist and author, specialising in north Africa and the Gulf.

Follow him on Twitter: @jeanpieeresrn

This article was originally by our partners at OrientXXI

Opinions expressed in this article remain those of the author and do not necessarily represent those of The New Arab, its editorial board or staff.