Egypt’s Command Economy

A WikiLeaks cable shows how the regime has bought off the military.

Egyptian President Hosni Mubarak

CAIRO—The lavish headquarters of Egypt’s Ministry of Military Production is a far cry from the rundown buildings that surround it in central Cairo. From the golden handrails of the sweeping central staircase to the ministry’s fancy custom-made drink coasters—the place is awash with cash.

Minister Sayed Meshal, a former general, is eager to tell me that the ministry can afford its gaudy accoutrements—after all, it turns a tidy profit. He says the ministry’s revenues from the private sector are about 2 billion Egyptian pounds a year ($345 million). It employs 40,000 civilians, who assemble water-treatment stations for the Ministry of Housing, cables for the Ministry of Electricity, laptops for the Ministry of Education, and armaments for the Ministry of Interior’s vehicles. Meanwhile,other ministry employees produce washing machines, refrigerators, televisions, and metal sheeting for construction projects. 

While we’re discussing metal sheeting, Meshal adamantly denies that the government subsidizes any of his products. But in the case of these sheets, the ministry has a monopoly; it is the only place in Egypt producing the alloy in this size. “You’re a clever lady,” exclaims Meshal with a smile and shake of his head when I point this out to him. He chuckles that I’m getting the best of him.

I smile back. His small admission feels like a huge victory.

Almost everything related to the Egyptian military is a black box. The number of people serving, their salaries, the military’s land holdings, its budget—none of that information is in the public record. Joshua Stacher, a political science professor at Kent State University who studies the Egyptian military, estimates that the military controls somewhere from 33 percent to 45 percent of the Egyptian economy, but there’s no way to know for sure.

The military has defined Egypt’s political path since Gamal Abdel Nasser overthrew the monarchy in 1952. And with President Hosni Mubarak 82 and ailing, the key question is whether the military will weigh in on his successor. Most observers think the president wants his banker-turned-politician son Gamal to take over, but can the all-powerful army accept a civilian leader for the first time in more than 50 years?

A Dec. 14 WikiLeaks cable dump exposed something that I had spent months chasing: The civilian regime has tried to neutralize the military’s kingmaker powers by establishing it as a major stakeholder in the status quo. In a period of transition, the Egyptian military will be more concerned about whether Egypt’s next president will protect its vast economic holdings rather than if he wears a uniform.

“The military helps to ensure regime stability and operates a large network of businesses, as it becomes a ‘quasi-commercial’ enterprise itself,” wrote U.S. Ambassador Margaret Scobey in a September 2008 cable. “The regime, aware of the critical role the MOD [Ministry of Defense] can play in presidential succession, may well be trying to co-opt the military through patronage into accepting Gamal’s path to the presidency,” she speculated.

The Egyptian military manufactures everything from bottled water, olive oil, pipes, electric cables, and heaters to roads through different military-controlled enterprises. It runs hotels and construction companies and owns large plots of land.

The Egyptian military has “an enormous vested interest in the way things run in Egypt, and you could, I think, be sure that they’ll try to protect those interests,” a Western diplomat in Cairo told me. “There’s a certain conventional wisdom [that] therefore the next president has to come from the military. I don’t know that that’s true. It’s the interest that they’ll be interested in protecting.”

But reporting on the military is difficult. No one wants to talk about the subject, and people who are willing to talk don’t want their names used. If civilians are worried, Egyptian journalists are petrified. “There is Law 313, [passed in] the year 1956, and it bans you from writing about the army,” Hesham Kassem, an independent publisher, told me. “It’s the taboo of journalism.”

“If the minister of defense was to go on CNN and say, ‘We have changed the color of our uniform,’ and then you do a story about that, you could be [prosecuted.] You say, ‘Well, he said it on CNN,’ and they say, ‘Yes we know, but you cannot write without a permit,’ ” Kassem explained.

Consequently, very little is known about the military’s expansion into the private sector. The transition occurred after the 1979 Camp David Accords, when army factories under the control of the National Service Products Organization shifted some of its production from armaments to consumer goods. The NSPO also happens to have been Minister Meshal’s last posting.

The NSPO was impossible to reach, but Meshal explained that the NSPO’s factories are staffed entirely by active military personnel, and, like his ministry, they produce goods, including olive oil and bottled water, for both the armed services and the civilian market. Safi, the famous Egyptianbottled water brand produced by the NSPO, is named after Meshal’s daughter, he told me gleefully, pointing to a bottle on his desk.

But the Egyptian military has not only infiltrated the commercial market, it also dominates top posts in the civil service. Twenty-one of Egypt’s 29 provincialgovernors are former members of the military and security services, as are the heads of institutions such as the Suez Canal Authority and several government ministries.

Retired military officers are also seen throughout the middle-management levels of private sector companies “It’s a sort of jobs program,” says Kent State’s Stacher. “They tend to offer them higher salaries as a sort of golden parachute to get them out of the military and into the economy.”

An ex-airline industry employee told me that at EgyptAir, the country’s national carrier, “a lot of the middle management is becoming ex-military, to the extent that the original employees are becoming depressed. They feel this organization is not theirs anymore. Imagine you are killing yourself in a position for years, and a military man arrives. What would you feel?”

For a country still struggling to remove the shackles of an old command economy, the price of keeping the military out of politics may be an economic one. The September 2008 cable released on Tuesday reports State Department sources claiming Egypt’s defense minister can “put a hold on any contract for ‘security concerns.’ ”

As Scobey argued in the same cable, the military and the market do not mix: “We see the military’s role in the economy as a force that generally stifles free market reform by increasing direct government involvement in the markets,” she wrote.

So, while post-Mubarak Egypt may end up being run by a civilian, it’s likely that a good chunk of the economy will still belong to the generals.

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