US expert: Leadership of ‘Military Inc.’ is running Egypt

The Egyptian military’s economic interests have long been considered too taboo to discuss in the mainstream media, so little is known about the sections of the economy that fall under the military’s control. But now that a military council is formally ruling the country, the time is ripe to examine the issue more closely.

Robert Springborg has written extensively on the Egyptian military and the politics and political economy of the Middle East. He is the author of two books on Egypt: "Mubarak’s Egypt: Fragmentation of the Political Order" (1989) and "Family Power and Politics in Egypt" (1982). His most recent work is a chapter on gas and Egyptian development in "The Handbook of Oil Politics," due for publication in 2012. From 2000 to 2002, he was director of the American Research Center in Egypt, and has held numerous other positions in the US, UK and Australia leading programs on the Middle East.

Al-Masry Al-Youm recently spoke on the phone with Springborg, who is currently in the US, about the importance of the military’s business interests in its decision-making process, what is meant by the military economy and the military’s relationship with Egypt’s privatization program.

Al-Masry Al-Youm: In early February, before Hosni Mubarak stepped down, you warned that the military would look to hold on to power. This is what we seem to be witnessing now with a longer-than-planned transitional phase.

Robert Springborg: I don’t believe I said the military would seek to hold onto power in the form of a classical coup d’etat. What I meant to say in any case was that the military would seek to ensure that it was not subordinated to any other power. The delay in constituting a new system of government results probably not from a change in the military’s strategic objective of “ruling but not governing,” but from the tactical difficulties of forming a civilian government that forswears any meaningful control over the military.

Al-Masry: How much do you think the military’s vast business interests in the country influence their desire to stay in power?

Springborg: The business interests of the military are hugely important to their decision-making, and the leadership of "military incorporated," which is same as the leadership of the military itself, is now running the country.

A key problem is that the military economy lacks transparency. It is opaque, so we don’t know its exact size or components. Another issue is that the military’s business interests distract them from their national security roles, of which the key but not only one is to defend the country. The Egyptian military lags behind others in the region in part because it is so preoccupied with generating revenues. Its abilities to carry out search and rescue, humanitarian assistance, disaster relief, anti-piracy, and to operate with other, friendly forces are weak. They have modern equipment, but much of it is not operable because they aren’t training personnel adequately to use nor to maintain it. One reason why they are not is that they employ conscripts in military-controlled businesses. 

Al-Masry: How do you define the military economy?

Springborg: The military economy includes the numerous factories and production facilities that fall under the Ministry of Defense and Ministry of Military Production. These also include companies affiliated with the Arab Organization for Industrialization and National Services Production Organization. In theory, these are state-owned entities but their accounts are not subject to financial oversight by the Central Auditing Organization.

Al-Masry: A trend in the economy during the transitional phase is the re-nationalization of companies privatized under the Mubarak regime. How much is this in the military economy’s interests?

Springborg: The military opposed privatization that intensified in 2004 under the government of former Prime Minister Ahmed Nazif, and that was overseen by former Investment Minister Mahmoud Mohie Eddin. It was upset at the increased pace of privatization. That said, the military was happy with privatization as long as it ended up [gaining from it]. It didn’t want the government to sell state-owned enterprises to Gamal Mubarak’s cronies. So under the Nazif government, some of the privatization in state-owned enterprises went to the military to mollify its leadership. Its interests in strategic areas, such as port facilities, ship repair and building, increased. The Alexandria Shipyard, for example, is owned by the military, and under Nazif they acquired a competitor company. There was also an unwritten rule under Mubarak that mid-ranking officers and generals would get senior positions within privatized companies. Aviation companies and construction companies do have senior generals working in them.

Al-Masry: How important are their business holdings given that strategic industries, such as cement, are not within their control?

Springborg: Well, they are unhappy about that state of affairs. The military is not strongly represented in energy-intensive industries. The compensation to that is that they do control a lot of land. The total asset value of their land holdings is not clear, but we know that much of the land allocated to the construction and tourism sectors was or remains under military control. Starting from the 1980s, under Mubarak, the military got the land and crony capitalists got the energy intensive production industries.

The military’s biggest interest is in the construction industry. This is because the military has its own, internal construction capacities; because of its influence over the allocation of land; and because construction depends heavily on relations with government, either because it is paying for it or because it must authorize it. Military officers have the governmental connections that facilitate contracts and approvals.

Al-Masry: From the perspective of protecting the military economy, is the military threatened by the upcoming parliamentary and presidential elections?

Springborg: Yes. What it wants is a weak parliament and a presidency that will not challenge its authority. As it now looks the parliament will be weak because it will be divided among various political forces and because it will not be based on any definitive constitutional authority. So it will not be strong enough to oversee the military, such as by examining its finances. So, any civilian control of the military by default will fall to the president.

That is why the apparent thinking now of the military is for the president to be someone from the military. The delay of the presidential election is due in part probably to the attempt to prepare the ground for a candidate either from the military or absolutely subordinate to it. In the meantime the military will look to expand its role in the economy, either through acquiring more companies or by assisting officer-owned companies gain more business. 

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