Battling for Egypt’s economy

The Egyptian military stamps itself as protector of the nation, but behind this carefully tended mythology the army controls a multibillion-dollar business empire that trades in products not normally associated with men in uniform: olive oil, fertilizer, televisions, laptops, cigarettes, mineral water, poultry, bread and underwear.

Estimates suggest that military-connected enterprises account for 10% to 40% of the Egyptian economy. It is an opaque realm of foreign investments, inside deals and privilege that has grown quietly for decades, employing thousands of workers and operating parallel to the army’s defense industries.

The coming weeks will reveal how the military will maneuver to protect its authority and financial holdings as it prepares to hand power to a new president and civilian government in June. The transition is a key test in the unfinished revolution that toppled President Hosni Mubarak, a career military man, and led to the political ascension of the Muslim Brotherhood and other Islamists.

The military’s future role is often framed in the context of Turkey, where the Islamist-dominated government has curtailed the reach of the once-unassailable Turkish army. The more drastic flip-side scenario is that Egypt’s military, fearful of infringement, veers more toward the Pakistani army, never bashful about sidelining the country’s elected officials in moments of crises.

For now, at least, the military appears to be taking a pragmatic tack to guarding its interests.

Islamists, led by the Muslim Brotherhood, control about 70% of the parliament and will have a large say over choosing the next president. The military has never trusted the Islamists and has buttressed the governments that persecuted them for decades. But the generals have been working with the Brotherhood so that each side benefits.

Some politicians and analysts say the Brotherhood and the military have reached a closed-door agreement that the new president will be sympathetic, if not loyal, to the army. The Brotherhood, however, is facing internal dissension and has yet to endorse a candidate. Its members are divided over whom to choose after several possible contenders reportedly rejected the group’s backing.

“The military started preparing for its future right after Mubarak was toppled,” said Aboul Ezz Hariri, a parliament member who is running for president with the Socialist Popular Coalition Party. He said that by not blocking the political ambitions of the Brotherhood and ultraconservative Salafis, the military entered into an odd, if convenient, alliance with the Islamists.

“They have all conspired to serve the army’s aim of keeping its control over the country for a long time to come,” he said.

Much of that grip will be in key provinces where current and former military officers are governors and leading political and business figures, managing corporations that build hospitals, villas and toll roads. They have attracted foreign investors from France to Taiwan in companies in sectors as diverse as maritime shipping and computer chips. It is a battle for the economy that began nearly a decade ago when Mubarak’s son Gamal and his cronies benefited from privatization and freer markets.

The generals viewed Gamal’s programs as a threat to national stability and to their own interests in taking over state-owned companies. The army’s disdain for the president’s son was so deep that a 2008 U.S. diplomatic cable quoted an Egyptian analyst as telling American officials: “The military does not support Gamal and if Mubarak died in office, the military would seize power rather than allow Gamal to succeed his father.”

With Gamal and many of his confidants now on the run or in jail on corruption charges, including steel magnate Ahmed Ezz, the military has few obstacles to expanding its financial reach while the civilian government concentrates on improving the lives of the more than 40% of Egyptians who live on $2 a day or less.

“With several civilian oligarchs at the mercy of corruption probes, the military is much freer to dictate its terms,” according to a recent study by the Middle East Research and Information Project. “With the power to determine the winners and losers at the commanding heights of Egypt’s capitalism, the [military] will retain unchallengeable clout long after the formal return to civilian rule.”

Some army-controlled corporations have been around for decades, such as El Nasr Co. for Services and Maintenance, founded in 1988 and managed by retired Gen. Ali Fahmy.

The company’s website, in English and Arabic, says it has 7,750 employees and provides pest elimination, car repairs, crane rentals and nurseries.

The website’s mission statement, however, is a bit out of date. El Nasr, it says, is working to “keep in line with the economical and industrial revival that our state is having [under] President Mohamed Hosni Mubarak.”

Despite crackdowns that have killed scores of protesters and YouTube videos criticizing generals for enriching their ranks amid widespread poverty, the army, which has tried 12,000 civilians in military tribunals, remains revered by many Egyptians as the only institution that has preserved national unity and cultural pride.

It is expected to rely on this image to ensure three things as it prepares to step aside: minimal government oversight on its budget, assurances its officers will not be prosecuted for human rights abuses over the last year, and a new constitution that doesn’t weaken its authority.

“The decisive battle for the military will be over the constitution,” said Mustafa Naggar, a lawmaker and member of the Justice Party. “The army will insist on keeping some privileges ... including keeping their budget secret and [attempting to] form a national security council of army officers to have the final say on political and military affairs.”

The army has long straddled two worlds. Every president since the 1952 coup that led to Egypt’s independence has been a military man: Gamal Abdel Nasser, Anwar Sadat and Mubarak. When the army seized power after Mubarak’s overthrow, the popular slogan was: The army and the people are one hand.

In fact, it was the army and the government that were always one hand.

But the last year has shown that the military has no affinity for being the public face of power. The ruling Supreme Council of the Armed Forces has clumsily, and at times violently, presided over the nation whose aspirations for wider civil rights ran counterintuitive to the military’s inherent rigidness. As the ruling generals prepare to return to the barracks, however, they are laying down markers.

The army will be “hard-pressed to defend the lines it has drawn in the face of a contentious political arena and energized Egyptian public,” Robert Springborg, a professor in the department of national security affairs at the U.S. Navy’s Naval Postgraduate School, wrote recently in the Egyptian Independent news website. “Demands will intensify for scrutiny of its budget, its internal management, and for it to at least share responsibility for making national security policies.”

Much of the military’s fate may rest on how astute and patient the Brotherhood is in coming months. Too much time spent reining in the army could distract the Islamists from the nation’s pronounced economic and social problems.

The Brotherhood has been waiting 84 years for this moment and doesn’t want to jeopardize it with a protracted and risky fight with the army.

A central aim of the Islamists is to draft a constitution that gives more power to the parliament. Such a tilt would siphon authority from the president, which could gradually weaken the military.

There is also talk that the Brotherhood, which had said it would not run a presidential candidate from its ranks, might break that promise amid concern that some front-runner candidates may not support the group’s agenda. Such a move could upset relations between the Islamists and the generals.

But so far there have been no signs of weakening from an army that, as it exits the public stage, takes with it a tight grip on the nation.

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jeffrey.fleishman@latimes.com

Amro Hassan in The Times’ Cairo bureau contributed to this report.