The Egyptian military holds a substantial and widely reported on share of the country’s economy. Because of the secrecy surrounding military finances, there is a particularly extensive amount of speculation about the breadth of its interests in non-military production.
In her blog, Rebel Economy, Farah Halime contests that “the Egyptian military is far from being a well-oiled business machine. In fact, historically, the army have been very bad at making money and its own failures have led it to seek other forms of income.”
In addition to being poor businessmen, Halime adds that the army’s “economic strategy” is riddled with corrupt practices. Mr. Meshaal, who served as the minister of military production till 2011, is now being investigated for awarding contracts “above cost”.
Writing for Jadaliyya on the same topic, Zeinab Abul-Magd adds that
Former Luxor Governor General Samir Farag—who previously served as director of morale affairs of the Armed Forces—sold land to a local businessman below market prices. The land was initially designated for building an Olympic games stadium. In fact, after hundreds of millions of Egyptian pounds were spent on the project, all of a sudden construction was suspended and all the spent funds went to waste, as the land was sold to a businessman that owned a hotel across the street. Similarly, the residents of Aswan allege that their governor General Mustafa al-Sayed was involved in corruption cases involving public lands and the tourism sector. Al-Sayed recently appointed at least ten retired army brigadier generals as managers of the quarries and river ports and offered them exorbitant salaries, even though they lack relevant qualifications and experience.
In addition to cases of corruption, the military has a poor track record with workers’ rights.
The name “Military Factory 99” has also become associated with the repression of workers, especially that labor-employer relations in the factory are not subject to traditional union or government regulations. In August of 2010, Factory 99’s workers broke out into intense protests after one of their colleagues died as a result of an explosion. The director of the factory, who was also a general, had brought in a number of gas cylinders in order to test them out, even though the workers were not trained to use them. When several cylinders exploded, he told the workers that it would not matter if one or two of them died. Then, when one of them did in fact die, they stormed his office, gave him a beating, and then staged a sit-in. Subsequently, the workers’ leaders were tried in military courts for charges of revealing “war secrets” on account that they spoke publicly about butane gas cylinders.
Inefficiency, corruption, and rights abuses aside, Halime concludes her article with predictions about the military’s increasing stake in economic activities.
General Sisi has said nothing about the army’s economic prerogative but we can already deduce what the military is interested in: remaining conservative, keeping policy simple without innovation or anything too radical (such as cutting those precious energy subsidies that the army rely on so much to run their factories at a cut price) and focusing on big, state-run projects (just like Mubarak).
So far, her predictions have been accurate. The newest draft of the constitution “enshrines autonomy for the military” and ensures a continued lack of budgetary oversight. As of yet, Sisi has not announced whether he will run for president or not, although the military establishment benefits either way.
Concurrently, and with much less fanfare and media attention, the military has been collecting billions in government contracts. Mohamed El Dashan explains how the military has been profiting since Morsi’s ouster last summer.
It appears that interim president Adly Mansour issued a presidential decree allowing the state to directly award government contracts in cases of emergency. Which means, circumventing every rule of government procurement.
Because, hey, why go through the pesky process of bidding to pick the cheapest supplier… when you can pick the one in uniform?
And just like that – it appears that every government contract over the past few months has been an emergency.
So over the course of two months – from late September to late November – the army was awarded 7 billion EGP (1 bn USD) worth of government contracts in infrastructure by the council of Ministers. The breakdown is as follows. As you can see, clearly ‘emergencies’ justifying this direct contract awarding:
4.7 billion EGP for 27 bridges and a tunnel
2.2 billion EGP for the Sinai investment plan over FY 2013-2014
357 million EGP for housing projects in El Alrish – 132 buildings
170 million EGP for housing projects in Ras Sedr – 62 buildings.
The on December 21st that the Ministry of Local Development had earmarked 2 bn EGP for slum development projects which will be awarded (surprise, surprise) to the army, as per an MOU to be signed the following week. Another article a few days later detailed some of the ministry’s spending projects, and aside from the slum development, the Ministry also has projected spending another 2 bn EGP to develop 14 train level crossings across the country.
And guess who’s doing those? The Army.
Most mind-boggling is how government officials have been justifying these contracts: Minister of Local Development, General (yes…) Adel Labib stated the contracts were awarded to the army “to ensure they would be accomplished promptly and accurately”. The Council of Ministers, when handing its 7 bn EGP to the army, noted they were selected for “their efficiency and discipline in the rapid implementation of projects, all while ensuring the highest quality standards.”
For the Egyptian military, being bad at business is no hindrance to getting more business.