If we reported there was a massive new sports center glittering like a jewel in the desert east of Cairo, complete with a resort hotel, five-lane highway, a stadium, and other shiny facilities, you would think Donald Trump or Steve Wynn had moved to town.
Not quite. Think the Egyptian military.
These days, everyone is speculating over the military’s role in the post-Mubarak transition to democracy. A week after it declared new laws expanding its own powers over the writing of the constitution, the budgets, legislative authority, and declaring war, the Supreme Council of the Armed Forces (SCAF) was forced to acknowledge that the winner of the presidential runoff was not one of its own, but a candidate raised up by the civilian (and Islamist) Muslim Brotherhood, Mohamed Morsi–Egypt’s first non-military ruler since the military took power in 1952.
The question of the moment is what the military might do now–especially since it effectively weakened the role of the presidency in a soft coup d’etat last week. But let’s explore for a bit what it is not likely to do: namely, go quietly into the shadows.
There’s been a lot of talk about whether the United States can use for leverage the $1.3 billion in military aid it has promised to the Egyptians. Apparently, it plans to. According to a recent Financial Times report, State Department spokeswoman Victoria Nuland said last week the 2012 aid money is being held in an American bank where Washington can still exert some control over it. But what most Americans don’t realize is that unlike the American military, the Egyptian military is not entirely dependent on anyone’s sloppy trough. In fact, it runs a “vast business empire” that is lucrative, powerful, and right now impossible to pin down.
According to a BBC News report by Magdi Abdelhadi, the new sports complex (which is connected to a “vast new suburb called ‘New Cairo,’ where the rich and powerful, including members of [SCAF] have luxurious villas”) was built in under two years–”a testimony to the army’s ability to get things done quickly and effectively.”
No one knows, according to this report, how the major desert complex came to be built, how much it cost, or who would reap the revenues from its use. This is in keeping with the secretive nature of the military’s “state within a state.”
“This is typical of the many projects built and run by the army’s vast business empire, which includes manufacturing of consumer goods, food, mineral water, construction, mining, land reclamation, even tourism,” says Abdelhadi.
As the debate over the role of the military in post-Mubarak Egypt intensified, General Mahmoud Nasr, the assistant defence minister, told a press conference in Cairo last year that the army would never hand over control of these projects to any other authority, adding that these were not state assets but were “revenues from the sweat of the ministry of defences and its own projects”.
At around the same period it was announced that the army had come to the rescue of the ministry of finance by lending the state a substantial amount of money to shore up its rapidly-depleting coffers.
This sums up how the Egyptian military operates like a state within the state.
Abdelhadi then goes on say that no one knows how much of the Egyptian economy the military’s businesses account for because all of them are “regarded as classified.” Estimates stretch from as low as 8 percent of Egypt’s gross national product to as high as 40 percent of the GNP.
Imagine for a moment the Pentagon grabbing public funding with one hand and operating as a kind of Rockefeller family empire with the other, with no public disclosure to speak of, including how much in taxes its businesses may or may not pay to the federal government. What’s more, think of the Pentagon putting Washington into its debt for major emergency loans. The full potential for corruption here is difficult to fathom.
But it gets worse–most of the civilian institutions and public-sector corporations in Egypt are run by former generals.
The country’s three main land-developing authorities (agricultural, urban and tourism) are headed by former military officers who, in addition to their pensions, receive lucrative salaries and perks associated with their civilian jobs. …
Any attempt to open up, let alone privatise, the military’s business empire will face stiff resistance, not just from the generals but also from powerful allies within the state bureaucracy; people who, besides benefiting personally from the status quo, are often by their very nature hostile to change.
So it would seem that SCAF is not only fighting to maintain control of Egypt’s political course but to protect its business interests as well. Those interests, the BBC points out, rest on a socialist or “state capitalist” economic platform established after the revolution that put the military and President Gamal Nasser into power over 60 years ago.
Followers of Nasser put up a candidate in this last election, and he came in third. As Abdelhadi points out, the military is now running what was left of Nasser’s legacy as its own private enterprise. Now a new non-military president will soon be “in charge,” but no one is certain whether he is strong enough to challenge the military’s authority. The economy is in a dangerous decline, and the military’s interests are so concealed that it is unclear whether they will hurt or help get Egypt back onto its feet.
The economy contracted by 4.3 percent in the first quarter of 2011 and stagnated in the following three quarters.
The Brotherhood’s economic plan relies on private Egyptian and foreign investors and the group has pledged to move fast to negotiate a loan from the International Monetary Fund (IMF) once it forms a government….
An army-backed interim government kept the economy on the rails since Mubarak’s overthrow through a series of short-term measures that have brought the country dangerously close to fiscal collapse.
These include financing a burgeoning budget deficit by selling domestic treasury bills and bonds at steadily rising interest rates and shortening maturities.
The pile of local currency debt has built up to well over 600 billion Egyptian pounds ($99 billion) from about 500 billion pounds just before the uprising.
The borrowing has stretched the lending ability of local banks, causing the average yield on 1-year T-bills to surge to almost 16 percent, its highest in more than a decade, from 10.4 percent in January 2011.
The interim government borrowed an additional $6 billion in T-bills denominated in U.S. dollars that the new government, strapped for foreign currency, will have to repay or roll over when the first begin maturing in November.
The interim government has also drawn down foreign reserves by more than half, to about $15.5 billion, to support the currency, partly out of fear that an increase in the cost of imported goods would fuel inflation and political discontent.
The dangerously low level of reserves has left the country with less than three months of import coverage.
Just more evidence of how complicated the landscape there really is, and how little our own politics can influence it right now. Washington establishment scribe David Ignatius offered his own superficial take on the military question on Sunday:
The army needs to retreat now to the proper, reticent role of the military — protecting the state and the constitution, in extremis, but otherwise letting civilians run the show.
That would be just swell, except that after reading Abdelhadi’s report it seems that any real “retreat” may be impossible. For all we know, it could collapse the economy.