Inquiries into the nature and origins of power in Egypt increasingly lead policy makers, academics, journalists, and analysts to the role of one actor in particular – the Egyptian Armed Forces (“EAF”).

Of course, it is no secret that the military establishment has been one of Egypt’s most influential blocs during the course of its recent political history. This point was most poignantly illustrated in 2013 when the EAF toppled Egypt’s first, and to-date only, elected civilian President; Mohammed Morsi of the Freedom and Justice Party.

Beyond its established political influence, the EAF are also exposed commercially, with private sector pursuits giving its’ national power another dimension. This article is adapted from a Shadow Governance report, available in the Report Store today (“A Military-Commercial Complex? Economic Interests of the Egyptian Armed Forces”), detailing the various military companies, projects, and individuals that are key to propping up the military’s economic interests.

Historical Political Context
Many, if not most, of Egypt’s modern military enterprises have their roots in the rise of the military establishment as a whole. A vanguard of military generals, belonging to the Free Officers Movement, liberated Egypt from colonial control in 1952 and removed King Farouk, who was increasingly perceived as an extension of British colonialism and corruption in the post WWII years. This is often taken to be the first critical development in the rise of the armed forces as a network of key decision makers.

Indeed, a noteworthy power player among the cadre of revolutionaries credited with toppling the unpopular monarch at the time was Gamal Abdel Nasser. Nasser nationalised swathes of the country’s assets and usurped private business interests in order to maintain strong, centralised state control over Egypt’s economy and society. In fact, many of the nation’s successful commercial elites today, such as the Mansour family for example, were then targets of the state and stripped of their businesses overnight.

However, Egypt’s modern political and economic history is not defined by Nasser’s tenure alone. Anwar Sadat replaced Nasser in 1970 and went on to write a new chapter into Egypt’s political history over the course of his 11-year rule. Importantly, this gave Egypt’s political elite – which for almost two decades stemmed from a nucleus of military elites – oversight of the transition towards a liberalised economy. Assets and industries that had been seized under Nasser were slowly transferred back into private hands, and the 1970’s witnessed the establishment of a great number of private companies in Egypt.

Ministry of Military Production
A cornerstone of the military’s access to the economy stems from the Ministry of Military Production. According to the MoMP’s website, which has not been updated since 2016, the date of establishment for the Ministry is taken as the 23rd of October 1954 – when the first bullet was produced from one its military factories (MoMP, 2016). Further research points to this being one of the very first ‘commercial’ entities used by the military in Egypt’s modern political era.

This institution divides its operations into two broad categories, as detailed by its public disclosure. These fall into either ‘military production’ or ‘civilian production’, illustrating the fact that the EAF has openly bridged the gap between its role as a defence actor and the wider domestic economy.

The MoMP is one of the military entities seemingly benefiting from the state’s official discourse of taking decisions in line with the ‘national interest’. For example, the head of the MoMP, Mohammed Al Assar, travelled to Sudan in early 2017 to discuss opening a permanent exhibition of MoMP’s products in Khartoum, ostensibly to encourage state exports and “provide hard currency” to Egypt (Daily News Egypt,13.02.2017).

In fact, the previous 12 months have been a busy period for the MoMP. Al Assar signed a protocol with the Saudi Gulf Elevators and Escalators Company (“GEEC”) in May 2017, valued at an undisclosed amount (Daily News Egypt, 02.05.2017). Daily News Egypt reported in December 2016 that the MoMP was making EGP 700 million available (U.S. $39.28 million) for investment in electricity and nuclear plants, thereby penetrating Egypt’s energy sector as well.

This would no doubt provide the entity, and its many subsidiaries, with a stable source of income during Egypt’s currently difficult financial climate, irrespective of whether the deals have the effect of propping up the wider economy.

National Service Products Organisation
The Egyptian military is also exposed to the economy via an entity known as the National Service Products Organisation (“NSPO”). The company was established in 1979, corresponding to the year of the Egypt-Israel Peace Treaty, and soon began to reap many of the rewards on offer due to Egypt’s guarantees towards the pro-Israeli Western bloc.

The most extensive sector-specific interests of the NSPO lies in agriculture. In fact, there are 10 registered agricultural companies in the NSPO’s name, which represents almost 50% of the entity’s 21 known subsidiaries. As such, the agriculture sector accounts for more than double the NSPO’s presence in any other sector.

In this sense, it has struck up a strong relationship with Kingdom Agricultural Development Company (“KADCO”), a company established by Saudi royal prince and financier, Al Waleed bin Talal. KADCO is believed to work in close collaboration with the military, and recent reports suggest that the NSPO acquired the entity for U.S. $70,000 in early 2017 – a significant reduction in value from a peak value of U.S. $55 million (Mubasher, 04.04.2017).

Again, the sources of military income which facilitate acquisitions and expansion should be questioned, as the state most likely acts as underwriter for the EAF’s commercial pursuits.

Other Relevant Entities
There are a host of additional actors involved in the military’s ‘commercial complex’, these being profiled in the report.

Chief among these is the Armed Forces Engineering Authority, or ‘Engineering Authority’ (“EO”). Head of the EO, Kamil Wazir, is a powerful figure tasked with ensuring that the EO functions as a successful commercial entity, mostly by winning large scale construction projects. For example, it oversaw the renovations to Boutrousiya Church at the end of 2016, following the attacks it suffered due to terrorism.

Another heavyweight is the Arab Organisation for Industry (“AOI”). Originally founded by a consortium of nations in 1975 - including Egypt, Saudi Arabia, Qatar, and the United Arab Emirates - the AOI is now wholly owned by Cairo. It has been involved in everything from museum construction to solar panel production and has transcended its role as a military production company. It is reported to enjoy several privileges, such as: above monitoring by the Central Auditing Organisation, a budget out with the remit of Parliamentary scrutiny, exempt from paying customs on imported materials, and untaxed revenues (Egypt Independent, 05.09.2012).

Finally, a Jordanian entity known as Dar Al Handasah, operates a subsidiary called Dar Egypt which is known for carrying out contracts for the EAF. It is smaller in size than the aforementioned entitles, but most likely carries significant influence given the nature of its work. It has won several high-profile contracts that will be further explored in the upcoming report.

Patronage and Resource Distribution – All but in Name
The contracts and financial breaks awarded to the commercial entities associated with the military are a prime example of resource distribution by the state.

It is perhaps one of the most entrenched systems of patronage to be found across any of the world’s frontier or emerging markets, and should be viewed as such by foreign investors looking to penetrate the domestic economy of Egypt.