Israel Matzav: Why Egyptians are starving?

Monday, December 26, 2011

Why Egyptians are starving?

I have discussed several times on this blog the possibility that Egypt will run out of foreign currency and therefore Egyptians will starve in the not-too-distant future. I know that I have one reader who dismisses those claims as lies and changes the subject when I raise them - perhaps she will wish to read this article by Mohamed al-Khalsan (nice Muslim name) in its original Arabic to see that these claims are real.

The reason Egyptians are starving might have something to do with a topic that cannot be discussed in public in Egypt. That topic is the Egyptian army's role in the Egyptian economy. That link is in English for those who, like me, do not read any Arabic (Hat Tip: Sultan al-Qassemi via Twitter).

Until this very day, the role of the military establishment in the economy remains one of the major taboos in Egyptian politics. Over the past thirty years, the army has insisted on concealing information about its enormous interests in the economy and thereby keeping them out of reach of public transparency and accountability. The Egyptian Armed Forces owns a massive segment of Egypt’s economy—twenty-five to forty percent, according to some estimates. In charge of managing these enterprises are the army’s generals and colonels, notwithstanding the fact that they lack the relevant experience, training, or qualifications for this task.

The military’s economic interests encompass a diverse range of revenue-generating activities, including the selling and buying of real estate on behalf of the government, domestic cleaning services, running cafeterias, managing gas stations, farming livestock, producing food products, and manufacturing plastic table covers. All this information is readily available on the websites of relevant companies and factories, which publicly and proudly disclose that they belong to the army. Yet for some reason the military establishment insists on outlawing any public mention of these activities.

Why is the budget of the Egyptian army above public transparency and accountability? Is it because it is exclusively concerned with national defense and thus must remain classified? Not really.

It is certainly true that one part of the Egyptian army’s budget is concerned with defense-related activities, such as the procurement or co-production of weaponry. These activities, however, hardly have anything to do with the “classified” part of the army’s budget. As a matter of fact, information about many of these budgetary items is readily available in public records. That is because such items are mainly concerned with Egypt’s joint endeavors with a foreign partner that is legally obligated to disclose to its own citizens a full account of its activities, including military aid and arms deals (or co-production of military equipment) with countries like Egypt. This partner is, of course, the United States government, which grants the Egyptian army an annual 1.3 billion USD in aid through its Foreign Military Financing program. Reports on official US government websites, such as that of the Government Accountability Office, Department of State, Department of Defense, and Congress, provide data on US arms sales to Egypt and military equipment that the United States helped produce in Egyptian military factories.

The part of the military’s budget that is kept secret has little to do with national defense and more with the huge profits the army accrues from the production of non-military goods and services. In other words, these budgetary items have to do with: how many bags of pasta and bottled water were sold last month; how much money “Wataniyya”, the military’s gas station, generated last year; how many houses “Queen”, the military’s cleaning services company, attended to this month and how many nurseries the same company is in charge of running; how many truckloads of fresh beef have the military’s high-tech slaughterhouses in East Uwaynat sold this year; how many cabins they managed to rent out in the north coast Sidi Crir resort last summer; and how many apartments they sold in Kuliyyat al-Banat residential buildings and at what price? All these items together make up the “classified” part of the army’s budget, which the military establishment insistently keeps off the public record and out of the reach of parliamentary and public deliberation as well as oversight. Attempting to discuss the army’s so-called classified activities in public could result in military prosecution and trial, because these are, supposedly, “national security secrets” that Egypt’s rivals—like Israel—must not find out about.

This article examines the hidden role of the military in Egypt’s economy and how it tends to take on the form of economic activities for which the army is unfit and that steer the military establishment away from its principal obligations, namely advancing national defense and protecting the country’s borders. Of greater concern is how many of the army’s leaders have entered into networks of corruption and unlawful partnerships with private capital. The discussion that follows does not rely on classified sources, and is based on public information available in the news media, and the websites of the military-owned companies along with the job and marketing ads they publish.