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Battling for Egypt's economy

March 25, 2012|Jeffrey Fleishman
  • Egyptian generals depart after a funeral last week for Coptic Christian Pope Shenouda III. The army is revered by many Egyptians as the institution that has preserved national unity.
Egyptian generals depart after a funeral last week for Coptic Christian… (Ahmed Ali, Associated Press )

CAIRO — The Egyptian military stamps itself as protector of the nation, but behind this carefully tended mythology the army controls a multibillion-dollar business empire that trades in products not normally associated with men in uniform: olive oil, fertilizer, televisions, laptops, cigarettes, mineral water, poultry, bread and underwear.

Estimates suggest that military-connected enterprises account for 10% to 40% of the Egyptian economy. It is an opaque realm of foreign investments, inside deals and privilege that has grown quietly for decades, employing thousands of workers and operating parallel to the army's defense industries.

The coming weeks will reveal how the military will maneuver to protect its authority and financial holdings as it prepares to hand power to a new president and civilian government in June. The transition is a key test in the unfinished revolution that toppled President Hosni Mubarak, a career military man, and led to the political ascension of the Muslim Brotherhood and other Islamists.

The military's future role is often framed in the context of Turkey, where the Islamist-dominated government has curtailed the reach of the once-unassailable Turkish army. The more drastic flip-side scenario is that Egypt's military, fearful of infringement, veers more toward the Pakistani army, never bashful about sidelining the country's elected officials in moments of crises.

For The Record
Los Angeles Times Wednesday, April 04, 2012 Home Edition Main News Part A Page 4 News Desk 2 inches; 63 words Type of Material: Correction
Egypt military: An article in the March 25 Section A about the Egyptian military's role in that country's economy said that current and former military officers "have attracted foreign investors from France to Taiwan in companies in sectors as diverse as maritime shipping and computer chips." That assertion should have been attributed to a report in the Middle East Research and Information Project.
For The Record
Los Angeles Times Sunday, April 08, 2012 Home Edition Main News Part A Page 4 News Desk 2 inches; 63 words Type of Material: Correction
Egypt military: An article in the March 25 Section A about the Egyptian military's role in that country's economy said that current and former military officers "have attracted foreign investors from France to Taiwan in companies in sectors as diverse as maritime shipping and computer chips." That assertion should have been attributed to a report in the Middle East Research and Information Project.

For now, at least, the military appears to be taking a pragmatic tack to guarding its interests.

Islamists, led by the Muslim Brotherhood, control about 70% of the parliament and will have a large say over choosing the next president. The military has never trusted the Islamists and has buttressed the governments that persecuted them for decades. But the generals have been working with the Brotherhood so that each side benefits.

Some politicians and analysts say the Brotherhood and the military have reached a closed-door agreement that the new president will be sympathetic, if not loyal, to the army. The Brotherhood, however, is facing internal dissension and has yet to endorse a candidate. Its members are divided over whom to choose after several possible contenders reportedly rejected the group's backing.

"The military started preparing for its future right after Mubarak was toppled," said Aboul Ezz Hariri, a parliament member who is running for president with the Socialist Popular Coalition Party. He said that by not blocking the political ambitions of the Brotherhood and ultraconservative Salafis, the military entered into an odd, if convenient, alliance with the Islamists.

"They have all conspired to serve the army's aim of keeping its control over the country for a long time to come," he said.

Much of that grip will be in key provinces where current and former military officers are governors and leading political and business figures, managing corporations that build hospitals, villas and toll roads. They have attracted foreign investors from France to Taiwan in companies in sectors as diverse as maritime shipping and computer chips. It is a battle for the economy that began nearly a decade ago when Mubarak's son Gamal and his cronies benefited from privatization and freer markets.

The generals viewed Gamal's programs as a threat to national stability and to their own interests in taking over state-owned companies. The army's disdain for the president's son was so deep that a 2008 U.S. diplomatic cable quoted an Egyptian analyst as telling American officials: "The military does not support Gamal and if Mubarak died in office, the military would seize power rather than allow Gamal to succeed his father."

With Gamal and many of his confidants now on the run or in jail on corruption charges, including steel magnate Ahmed Ezz, the military has few obstacles to expanding its financial reach while the civilian government concentrates on improving the lives of the more than 40% of Egyptians who live on $2 a day or less.

"With several civilian oligarchs at the mercy of corruption probes, the military is much freer to dictate its terms," according to a recent study by the Middle East Research and Information Project. "With the power to determine the winners and losers at the commanding heights of Egypt's capitalism, the [military] will retain unchallengeable clout long after the formal return to civilian rule."

Some army-controlled corporations have been around for decades, such as El Nasr Co. for Services and Maintenance, founded in 1988 and managed by retired Gen. Ali Fahmy.

The company's website, in English and Arabic, says it has 7,750 employees and provides pest elimination, car repairs, crane rentals and nurseries.

The website's mission statement, however, is a bit out of date. El Nasr, it says, is working to "keep in line with the economical and industrial revival that our state is having [under] President Mohamed Hosni Mubarak."

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