As a result, says Rashid Khalidi, a professor of Arab studies at Columbia University, "I don't think we are going to have neoliberal, Western-style economic reform in Egypt. I think there is going to be a return to some aspect of state-led development so the part of the economy that is controlled by the military may well be reinforced for some time."
All eyes turned to Egypt's military as protests shook the regime and President Hosni Mubarak's grip on power. Described again and again as the most trusted and stable of the country's institutions, it is, at the same time, one of the most mysterious and veiled. It is also one of the most powerful and untouchable. While the Cabinet and ruling party were revamped, the military portfolio remained the same. Field Marshal Mohamed Tantawi remains both Defense Minister and Minister of Military Production, which makes him, in effect, CEO of a vast military-run commercial enterprise that seeps into every corner of Egyptian society.
It's hard to overstate how entrenched the military is. It is universally hailed for its heroism fighting against the colonial British, and later against the Israelis. Virtually all Egyptian families have contributed officers or conscripts to its ranks, which number nearly half a million soldiers in uniform and about the same number in reserves. The military also fields and sponsors several of the country's most popular sports organizations. And, during recent bread riots, it helped mollify angry crowds by ramping up production from its own bakeries.
But despite the military's predominant role, the Egyptian public knows remarkably little about how the military actually operates. That's because writing about the military has long been off-limits to the press. The secrecy begins with the military budget, which Jane's estimates to be about $5 billion. However, one independent researcher has calculated that actual military expenditures could be four or five times larger. Part of the budget is made up of U.S. military assistance of $1.3 billion annually that provides financing for Egypt's major weapons systems. (The funding must be spent on U.S. goods and services and is therefore effectively a subsidy for U.S. defense contractors.) As for the parliamentary committee responsible for overseeing those expenses, it is stuffed with police and military officers; the prospects for meaningful civilian oversight anytime soon are dim.
Then there is the military's role in the economy. Military factories first sprang up in the 1820s to produce uniforms and small arms. Their role expanded with the state-led economy from the early 1950s and was consolidated when the military needed to place hundreds of thousands soldiers downsized after the peace agreement with Israel. (At that point, the active military had numbered about 900,000.) Now, military-run firms hold strong positions in a wide range of key industries, including food (olive oil, milk, bread and water); cement and gasoline; vehicle production (joint ventures with Jeep to produce Cherokees and Wranglers); and construction, in which it benefits being able to deploy conscripts during their last six months of service. Another source of the military's untold wealth is its hold on one of this densely populated country's most precious commodities: public land, which is increasingly being converted into gated communities and resorts. The military has other advantages: it does not pay taxes and does not have to deal with the bureaucratic red tape that strangles the private sector. (The military's corporate reputation is mixed: one of efficient management but with a Soviet-style focus on meeting production quotas vs. generating profits.)
There are widely divergent estimates of the size — and quality — of the military's business empire. Anthony Cordesman at the Center for Strategic and International Studies says it is proportionately smaller than that played by the People's Liberation Army in China. He also says it has shrunk in recent years. But Paul Sullivan, a National Defense University professor who has spent years in Egypt, says it is huge, probably accounting for 10% to 15% of Egypt's $210 billion economy.
The revenue streams from its various holdings help the military maintain the lifestyle its officers have grown accustomed to, including an extensive network of luxurious social clubs as well as comfortable retirements — all of which helps ensure officer loyalty.
This structure of economic power and patronage came under threat from the attempts of Gamal Mubarak, the President's son and heir presumptive, to reform Egypt along lines that skirted the generals. The military was particularly incensed that a key ally of Gamal's, Ahmed Ezz, was able to snap up state-owned steel assets, strengthening his commanding position in the industry. Not only was the military interested in the same firms, but as a major buyer of steel it would be vulnerable to Ezz's ability to impose near monopoly pricing.
Samer Shehata, an Egyptian academic at Georgetown University, notes that the military had started putting the brakes on Gamal's reforms in 2008. The generals pointed to the hundreds of labor strikes the economic changes had unleashed. "They said this was becoming an issue of national security," says Shehata. In fact, a key protest group organizing on Facebook took its name — the April 6 Movement — from an April 6, 2008, strike by textile workers in a key industrial city in the delta that was brutally suppressed by the regime.
Now, the bureaucratic upheaval that has come with the uprising appears to benefit further the old-guard military figures who opposed Gamal and his business associates. Many of the allies of the President's son had risen to high ranks in the ruling National Democratic Party, including Ezz, who was a member of parliament. Now, Ezz and several of the high-ranking party officials — alleged cronies of Gamal — are under investigation and barred from traveling overseas, their bank accounts frozen. Many are believed to be supporters — and major beneficiaries — of the privatizations that were part of Gamal's aggressive economic liberalization policies.
As a result, says Rashid Khalidi, a professor of Arab studies at Columbia University, "I don't think we are going to have neoliberal, Western-style economic reform in Egypt. I think there is going to be a return to some aspect of state-led development so the part of the economy that is controlled by the military may well be reinforced for some time."
Indeed, the military may evade any of the reforming that is being promised as part of the government's concession to the protesters. If a public-security institution is in for reform, it is most likely going to be the Interior Ministry, which has, according to Khalidi, a "mind-boggling" number of secret units that can turn out tens of thousands of men on the streets in any city overnight. The Interior Ministry is controlled by the General Intelligence Service, which is run by General Omar Suleiman, the military man recently appointed Vice President and entrusted with overseeing some sort of promised transition. "This way, the military has its cake and eats it too, basking in popularity and general support while other elements of the regime that are, in fact, subordinate to the military, absorb popular anger," says Robert Springborg, an expert on the Egyptian military now at the Naval Postgraduate School. Says Khalidi: "I would be very surprised if anyone — even the Muslim Brotherhood — is going to mess with the military for the foreseeable future even if there is really a democratic transition."
But the military does need reforming. In recent years there has been more and more grumbling from midlevel ranks that professionalization is taking a backseat to maintaining the military's hold on influence in the regime. That's what is behind the observation, cited in a U.S. embassy in Cairo cable revealed by WikiLeaks, that Field Marshal Tantawi is perceived to reward loyalty over competence. According to WikiLeaks, the Defense Minister is sometimes disdainfully referred to by midlevel officers as "Mubarak's poodle."
