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Egypt's wealthy army

Markus Symnak / sstMay 4, 2014

While the people of Egypt suffer from growing poverty and unemployment rates, the country's generals are well off. They have managed to strengthen their economic power in the aftermath of the revolution.

Abdel-Fattah el-Sissi (photo: Michael Kappeler/dpa)
Image: Reuters

Egypt's army is poised to place yet another candidate from its ranks at the helm of the country within a few weeks. Former army chief Abdel-Fattah el-Sissi (pictured above) is widely expected to secure a landslide victory in presidential elections on May 26.

Behind the scenes, Egypt's army - the biggest in the Mideast region - has regained its former strength. That is also reflected in terms of economic power. After the toppling of Islamic President Mohamed Morsi of the Muslim Brotherhood, Egypt's generals managed to secure several multibillion dollar projects.

"Many investors openly approach the army," said Sherif Zaazaa, a business expert and journalist who works for the Egyptian news portal Mada Masr. "They know that it's solely the army that's in control."

Billions from Gulf States

While privately owned companies struggle under the burden of overall chaos and political insecurity, the army appears to have been unaffected. According to some observers, the army is indeed profiting from the crisis.

Over the past months, the government in Cairo has commissioned construction companies operated by the military to carry out several large infrastructure projects. In November, Interim President Adly Mansour had issued a decree allowing the government to skip the tender process when placing an order - companies run by the army have largely profited from that move.

Adly Mansour (photo: REUTERS/Hamad I Mohammed)
Mansour allowed the government to offer contracts without a transparent tender processImage: Reuters

But especially foreign investors have been doing business with army generals. In March, the army closed a $40 billion (29 billion euro) housing project with Arabtec, a construction company from the United Arab Emirates.

Egypt's army also closely works together with Gulf States partners when it comes to energy supply and other commercial sectors.

"A lot of these deals are happening because it's the Gulf States leaders' way of supporting the military and to help them maintain influence and power in Egypt," said Shana Marshall, who heads the Institute for Middle East Studies at the George Washington University in Washington, DC.

Learning from Morsi's mistakes

By supporting Egypt's army, Saudi Arabia especially - as well as the United Arab Emirates - hope to keep the Muslim Brotherhood at bay. Monarchs in those countries were concerned when Morsi, a member of the Muslim Brotherhood, was in charge. They regard the Muslim Brotherhood's take on linking Islam with democracy as an attack on their own authoritarian rule.

Supporters of the Muslim Brotherhood attend a protest in support of ousted Egyptian President Mohamed Morsi (photo: EPA/KHALED ELFIQI)
Saudi Arabia and the United Arab Emirates want to keep the Muslim Brotherhood at bayImage: picture-alliance/dpa

Morsi had used caution when dealing with the army, and did not dare to curtail its economic power. But his unpopularity, along with the unpopularity of his Freedom and Justice Party, gave the army as an excuse to seize complete control of the country, according to Marshall.

Estimates differ on how much of Egypt's economy is controlled by the army - figures range from 5 to 60 percent. The country's defense budget, and other figures that could shed light on the army's true power, are kept secret.

Economic powerhouse

What is clear, however, is that the army has its hands in every single important sector - from pasta production, to manufacture of furniture and television sets, to oil production and infrastructure projects. The army owns hospitals and Red Sea tourist resorts, and has taken a leading role in agriculture.

These army-owned companies are usually headed by retired military personnel, who earn well privately in addition to collecting their public pensions. They are also not so interested in becoming politically active. It's not clear how many people in the army support el-Sissi as president, Zaazaa said. "That's why it's all the more important to keep potential critics occupied."

Construction site in Cairo (photo: FILIPPO MONTEFORTE/AFP/Getty Images)
The army also takes part in the construction businessImage: AFP/Getty Images

However, army personnel in suits generally lack business expertise. In order to stay competitive, the army had to resort to other measures: Their companies usually don't have to pay taxes, they profit from massive subsidies and can turn to enlisted personnel as cheap labor.

In the aftermath of the revolution on January 25, 2011, many Egyptians called for an end to these practices. However, these calls are hardly heard anymore - also because state-controlled media continue to praise the army as Egypt's savior from the Islamists.

Zaazaa thinks that things could change, should Egypt's economic situation not pick up pace under el-Sissi's rule. Marshall, on the other hand, warns that if many Egyptians suffer economically, that could dampen interest in transparency as they struggle to make ends meet.