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The New Egypt

Egypt’s army is still a force in the economy

Julia Simon Jan 3, 2012

Kai Ryssdal: Today was the third and final round of parliamentary elections in Egypt. Things are still kind of up in the air almost a year after the protests that toppled Hosni Mubarak.

A lot of Egyptians are complaining the economy’s no better since the military took over, a military that has a sizeable stake in that very economy. From Cairo, Julia Simon reports.

Julia Simon: At a gas station in Cairo, Mustafa Hassan is buying a packet of cigarettes and a bottle of water. He opens up a large, well-lit refrigerator.

Mustafa Hassan: I’m buying a kind of mineral water. It’s called Safi. But it’s made for the army forces.

Simon: So most of the stuff here was made by the army?

Hassan: Maybe some of them. They make some things. They make this water, they made this pickles, this macaroni, this oil.

Simon: They make the olive oil?

Hassan: Yeah.

Robert Springborg: There is something strange about Egypt in that the military economy is so relatively large. It did not used to be this way.

Robert Springborg’s a professor at the Naval Institute in Monterey, Calif. He says the army first moved into large-scale economic activities in 1979. Egypt had just signed a peace treaty with Israel. The top brass feared the peace dividend would lead to downsizing, so the army got involved in everything from consumer goods to construction to tourism. Springborg estimates that military companies and those owned by retired officers now make up about a quarter of the Egyptian economy. He says they stifle competition from private sector firms of all sizes.

Springborg: You don’t have to be small to be at the mercy of the military and officer economy. You can be very large indeed, but if you are in areas that they want to control themselves, you’re in trouble.

Some disagree, like retired general Mohamad Kadry, the head of military studies at the government-affiliated Ahram Center in Cairo. He insists the army controls only 2 or 3 percent of Egypt’s economy, and besides, it’s easy to find out about it.

Mohamad Kadry: The military is not working underground. If you have a factory, the factory is there; if you have a shop, the shop is there. So that’s why when people like you come here and say to me the military is representing 30 percent  of the Egyptian economy so I say, OK come to count them.

That’s not as easy as it sounds. When I went to Helwan, an industrial area south of Cairo, I went to a street to count military factories and I got detained for 12 hours. The Egyptian military doesn’t welcome scrutiny by outsiders nor by Egyptians either.

Again, Robert Springborg.

Robert Springborg: The military does not pay taxes and indeed its internal accounts are subject to no oversight or control by the parliament, by the general accounting organization or by anyone else.

In recent years, an expert unit in the Ministry of Finance was trying to get more access to military companies, and get them paying taxes. The military continues to resist this. Right now, Egyptians are voting for a new parliament. If it should get serious about overseeing the military economy, Springborg says the Finance Ministry would be up for the job.

But Professor Zeinab Abul Magd, an Egyptian who teaches history at Oberlin College in Ohio, says oversight is not enough. She says it’s time for the army to get out of business altogether.

Zeinab Abul Magd: I call for a withdrawal of the military from the economy because this is holding the Egyptian national economy back. You have a military that is controlling the economy in a Soviet manner. They are damaging the Egyptian economy at every level.

But even in post-Mubarak Egypt, the army remains a very powerful player, and it’s too early to say if it’s ready to get out of the economy, and focus on the business of well, just being an army.

In Cairo, I’m Julia Simon for Marketplace.

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