Table of Contents

The combination of discretionary powers, legal immunity, and opacity of information relating to military incomes and accounts has generated a mode of financial management that enjoys the veneer of legality and yet permits manipulation of public funds and assets without meaningful accountability to any civilian authority. Indeed, even within the military, financial management appears to consist of little more than basic bookkeeping—logging incomings and outgoings and producing end-of-year financial statements. This makes it virtually impossible either to evaluate their individual cost-effectiveness or to provide overall accounts for the military economy as a whole. It also obscures what insider accounts suggest is a financial system rife with corrupt practices. At best, a further consequence of financial opacity is that military agencies find it difficult to assess economic feasibility, resulting in demonstrably counterproductive investments of military-held funds.

As noted in Chapter 1, this enabling environment benefits numerous civilian agencies and private actors as well. The World Bank’s World Justice Project summarized the enduring problem in late 2014:

For years, people in power in Egypt created patronage networks in the civil service, judiciary, army, police and parts of the private sector that fed on public contracts. They and their contacts benefited from ‘rent-seeking’ (earning income free of competition). The institutional environment they relied on was based on little—if any—access to information; when it came to even minor bureaucratic decisions, ‘discretion’ (individual judgment) prevailed.1

The military economy does not all pull in one direction. It is shaped by much the same bargaining, interest-driven networks, and persistent rivalries as characterize the rest of the Egyptian state and political economy.

The outcome is a military economy that does not all pull in one direction. Its dynamics are shaped by much the same intra- and interagency bargaining, interest-driven networks and coalition-building, and persistent rivalries across sectoral and functional lines as characterize the rest of the Egyptian state and political economy. In the case of the military, economic decisionmaking and flows of capital are heavily determined by three factors:

  1. which military college, graduating class, and EAF branch of service the leading officials derive from, with their distinct and often competing cliques and networks;
  2. bottom-up interactions with interest groups in the state bureaucracy (including local government, as well as potential competitors in the MOI and intelligence services), public business sector companies, and the private sector, channelled through informal networks behind the façade of formal institutions and rules; and
  3. responses to top-down pressure generated by policy directives and goals set by the president.

Consequently, there is no economic or income-generating master plan, even if military economic agencies often work in tandem. They do so pursuing relatively consistent interests, but the evidence suggests that these tend to be defined and pursued independently of each other, and that each agency holds onto and manages its separate financial pot jealously. This is not to deny strategic behavior, but to underline implications for the military’s financial capital. First, military agencies will spend or invest funds in response to presidential instructions, even when these are economically unsound and lead to financial losses. Second, conversely, these agencies have virtually complete discretion to allocate funds they control—in the sense that they are not obligated to consult any other state agency beforehand, let alone obtain its authorization—so long as their activities align broadly with the president’s policy orientation. This is what offers scope for informal networks to capture or generate their own income streams, often in ways that undermine the purpose of both the president and of senior figures in the formal military economy—although evidence suggests that this happens with their full knowledge. Third, the military lacks both the equivalent of Eagle Capital, which in effect acts as a private equity vehicle for the GID, and the know-how or intention to deploy its funds as a form of venture capital to help develop civilian economic sectors.

These patterns and relationships may be observed by mapping how military incomes are generated and utilized, where they are deposited, and the means by which meaningful audit by any civilian agency, including parliament, is almost entirely avoided.

Mapping Military Income Streams: Going for Political or Financial Gain?

Clearly, the military’s mode of financial management is hardly unique among Egyptian state agencies, many of which also handle extra-budgetary incomes and deposits. But the volume and diversity of military income streams almost certainly exceed those of any individual civilian counterpart by a wide margin. Indeed, by May 2018 the head of an MOMP factory could happily tell Reuters correspondents that “[As] soon as I submit a request to the ministry and say I need 60 million or 40 million Egyptian pounds . . . the following day [minister] Major General Assar approves the request.”2

The anatomy of the military economy presented in this report indicates the following sources of legally sanctioned funding, most of which are exempt from all taxes and levies:

  • the defense budget;
  • fees earned from MOD-owned hotels, resorts, and other social and sports facilities;
  • sales of basic food commodities in domestic markets and provision of fee-paying medical services;
  • fees for managing public works, including land reclamation, megaprojects, and other housing and infrastructure schemes, or profit margins built into project budgets agreed with implementing contractors;
  • rent income—fees or donations received for granting licenses to use land, leasing facilities such as ports, and levying tolls on highways or at mines and quarries;
  • fees for providing specialized services such as clearing imported goods at ports of entry to Egypt, stevedoring, transport of heavy equipment, and demining of state land leased to civilian parties;
  • revenue from sales of civilian goods and services by military businesses (factories, farms, and other companies), including new ventures in mining, prospecting, and other extractive sectors;
  • deposits held in special funds and interest accruing on them;
  • fees for ad hoc activities such as contribution of troops to United Nations peacekeeping or demining missions, or the conduct of joint exercises on Egyptian soil with foreign militaries; and
  • income from commercial investments through front companies (this is indirect, but may be covered by the internal bookkeeping of the relevant military agencies).

Profit margins are probably significant in only a few of these activities, but not all are primarily profit-oriented anyway. For example, at least 60 percent of the defense budget is spent on salaries and compensation (allowances and benefits other than pensions).3 The balance is spent on other recurrent nonsalary expenses such as food and gear, healthcare, fuel, replenishment of combat consumables and upkeep of equipment, estates maintenance, and investment in new facilities or equipment. It is unlikely that funds remain unspent, but if so they are certainly retained by the MOD, and carried over on its books as deferred surpluses from year to year and transferred to one of its special funds. Currency depreciation has reduced the relative cost to the MOD of salaries and domestically sourced consumables and services (since they are denominated in Egyptian pounds), but generally made it difficult to do more than maintain the dollar value of the overall defense budget.

The defense budget nonetheless allows the bonuses and pay increases that help keep the EAF rank-and-file loyal. Military salaries are modest compared to public business sector and private companies (at least at management level), but defense sector personnel—the EAF, Ministries of Defense and of Military Production, and ancillary agencies—are designated as “special cadre” in state statutes and enjoy significant disparities in pay and benefits compared to civil servants.4 During periods of unrest, EAF officers have additionally received bonuses worth up to double their salaries, which are presumably charged to the defense budget.5 Basic pay has moreover been increased at least three times since 2011, although this has not offset the depreciation of the Egyptian pound. Military pensions saw a more significant cumulative rise of 140 percent by July 2016, and then a further 15 percent in July 2018 and the same again with effect from July 2019, but they are charged to the general state budget and so the defense budget is unaffected.6

Military salaries are modest compared to public business sector and private companies, but defense sector personnel are specially designated and enjoy significant disparities in pay and benefits compared to civil servants.

MOD-owned hotels, resorts, and other social and sports facilities presumably provide a steady income. The extension of the military’s exemptions from taxes (including VAT) to their civilian facilities enables them to inflate profits even while undercutting private competitors, though the MOD’s revenue from these facilities may be net of profits shared with the EAF officers who manage them.7 The ministry has moreover sought to expand its market share: the NSPO runs the Tolip Hotels and Resorts chain (launched in 2015, with at least fifteen hotels), while the MOD’s Financial Authority manages the al-Masah (Diamond) chain, including the massive al-Masah Capital Hotel that was inaugurated in the new administrative capital in late 2017.8

This expansion strongly suggests a desire to benefit from tourism, one of Egypt’s more lucrative economic sectors, which made a total contribution of EP528.7 billion ($29.6 billion), representing 11.9 percent of the country’s GDP in 2018.9 Along with other military-run social facilities such as clubs, military-owned hotels appear to cater primarily to a domestic clientele that accounted for 48 percent of the total number of tourists in Egypt in 2017, although this percentage was above normal following the decline in foreign tourism due to terrorist attacks. Indeed, it is evident that the al-Masah and Tolip chains seek business especially through preferential deals with government ministries.10 This is probably crucial for their viability in an industry dominated by the private and public sectors: the number and capacity of military-owned hotels is a mere fraction compared to the national total of 730 hotels with over 108,000 rooms by 2017, besides the 1.4 million rooms that the government plans to add to publicly owned capacity by 2020.11 High investment and operating costs, the offer of below-market prices, and profit-sharing among military managers may nonetheless mean that net profits are relatively modest. According to the private contractor who constructed the Triumph Hotel on behalf of the EAF Engineering Authority (for a client fronting for Military Intelligence), it cost EP2 billion; although this was atypical, as it was built in an unsuitable area, it confirmed that crony interests may dispense with commercial feasibility.12 But catering to an EAF officer corps with aspirations of upward social mobility and to a civilian middle-class that increasingly feels the financial pinch may be as important a goal as commercial gain in prompting these ventures.

Political objectives are even more unambiguously uppermost with regard to the sale of food and provision of medical services to the general public.

Political objectives are even more unambiguously uppermost with regard to the sale of food and provision of medical services to the general public. Sisi, military economic officials, and government ministers repeatedly emphasize the need to provide the public with basic commodities and services at affordable prices, countering inflationary pressures. The MOD and related agencies such as the NSPO probably make a net profit on cheap goods they import in bulk, such as frozen chickens and chicken parts, but this is done in response to political directives. Military-run supermarkets almost certainly profit from any imported commodities they sell, since these are probably exempt from customs duties, but the need to keep prices low to cater to the families of EAF personnel and low-income groups likely limits their overall profitability.

Political considerations similarly play into the provision of medical services. Researcher Ayman Emam estimates that the MOD’s Medical Services Department is the second-largest healthcare provider in Egypt after the Ministry of Health and Population, but its services are offered free to military personnel and their immediate families and to all other civilians at rates 50 percent cheaper than in private facilities.13 That potentially means the department may only break even or incur a loss on services to low-income groups. Receiving fee-paying middle-class patients at its upmarket hospitals and clinics is no doubt profitable, but whether the number of patients is sufficient to offset the cost of equipping and maintaining these facilities and of providing free services to ranking defense sector personnel cannot be established without full financial transparency. As in other instances, simply reducing the cost of meeting the expectations of core constituencies for advanced medical care is probably the primary objective, rather than capturing market share. Egypt’s failure to become a destination for medical tourists from other Arabs states additionally limits the commercial potential of military medical facilities.

In all cases, these activities are not major money spinners, though some have the potential to be. The military’s investment in them responds in part to demand from constituencies deemed socially and politically important, and therefore is not always driven by commercial feasibility or a clear profit motive. Furthermore, according to an Egyptian economic analyst, military special funds are partly used to pay bonuses and allowances to EAF personnel, but some profits are also distributed to a few dozen top-ranking officers.14 As political scientist Dina Rashed argues in her assessment of similar schemes in the Ministry of Interior, they predominantly benefit senior officials and commanders.15 The exact pattern of distribution cannot be independently verified, but in the case of special funds that come under the general state budget this was based on a percentage of basic salary until June 30, 2015, when profit-sharing was converted into fixed amounts.16 Profit-sharing is additionally written into the laws of establishment of military agencies producing civilian goods and services for commercial sale, such as the MOMP’s National Authority for Military Production; whether this is strictly applied only when an overall net profit is actually made, or taken from turnover before all income and spending is calculated, is unclear and may be open to misuse.

Harder to estimate are incomes to the MOD from licensing land use, leasing facilities, levying tolls on highways and quarries, providing specialized import or transport services, demining, and the like.17 These activities involve fewer sunk costs, and can ensure a dependable income that is especially significant in the case of approving use of state land. However, some of more lucrative sources of potential income may be traded for other kinds of advantages; a foremost example is waiving fees for granting use of land or facilities, in return for equity in new joint ventures or simply as a means of attracting investors to high-priority schemes such as the Suez Economic Development Corridor. Another is approving land use applications in return for the award of services, infrastructure, or supply contracts to companies favored by the military or in which officers have a commercial interest. Several of these activities moreover generate opportunities for illicit income on the side.

The MOD clearly has access to substantial funds, nonetheless. The NSPO’s establishment or acquisition of several new companies since 2016 suggests it can draw on considerable reserves held by the MOD, command large-scale funding from the state treasury, or leverage credit (cheaply) from publicly or privately owned banks—or assemble mixed funding packages. Much the same is true of construction under EAF management of dual-use civilian infrastructure such as highways and bridges since 2013, which is funded by the state treasury or government borrowing, but it is possible that the MOD finances military-only infrastructure using its extra-budgetary funds (rather than the defense budget). Similarly, the cost of expanding certain military-owned facilities has been at least partly offset by using the income from feeding civilian projects with products such as cement, reinforced iron, and water meters.

In theory at least, the MOD can also put its reserves toward making major arms purchases not covered by U.S. foreign military financing. This includes orders placed in 2014–2018 for French and Russian weapons systems totaling $8 billion (€7.15 billion) and up to $7.5 billion, respectively.18 At least half the €5.2 billion cost of purchasing French combat aircraft was to be covered by several Gulf states, with the other half coming from commercial loans raised and guaranteed by the French government, and Gulf states were reportedly contributing to some purchases of Russian weapons. The Egyptian MOD would still have had to finance a major part of these deals; this may be why, along with the subsequent withdrawal of Saudi funding, some agreements for French and Russian systems were not translated into actual orders or else have been delayed.19 And in all cases the MOD would have to allocate funds from the defense budget or its own reserves for the future costs of maintenance and repairs, upgrades and spare parts, and training for the duration of the operational lives of all these weapons systems, which can add up to six times their purchase cost. It is not certain that such investments are actually made, potentially undermining the EAF’s operational effectiveness.

Consequently, the only military agencies with clear opportunities to build substantial financial surpluses are the MOD and some of its subordinate agencies: the NSPO, the EAF Engineering Authority, and the Mining Sector. Management of national and megaprojects may have jumped to the top of the list of earners since late 2013, given the sheer scale of public works launched by the Mansour and, especially, Sisi administrations. Figures issued by the Administrative Monitoring Authority for military-managed projects indicate a volume of EP369 billion over nearly two years between February 2016 and January 2018 ($22.5 billion, using an average exchange rate for that period). In theory, if military agencies earned agreed fixed management fees for these projects, then a 5 percent rate would translate into EP18.45 billion in income for the MOD, or somewhat over $500 million annually (depending on the exchange rate used), while a 20 percent management fee would translate into over $2 billion annually. This is the range suggested by available, if fragmentary, evidence. The claim made in August 2019 by the fugitive owner of Amlaak Holdings, whose main client for fifteen years was the MOD, that the military regularly rakes in 25–30 percent of project budgets cannot be verified independently, nor can it be assumed to be true across the board, but even if it were, this would result in peak annual income for the military of $3 billion from public works.

But this is not how the finances of national and megaprojects work. The MOD and other military economic agencies do not receive set percentages of the budgets approved by the government in return for managing these projects. Rather, they are assigned a fixed budget within which to deliver the project, and then negotiate deals with the contractors who will undertake the implementation.20 Making a net income depends on the margin that military negotiators succeed in extracting between the official budget and actual project costs. Margins may vary widely. Military agencies are in a strong position to make smaller companies bear a greater share of costs—including those arising from fluctuations in currency exchange rates and the price of inputs—or even to compel them to undertake the work at their own expense, which they may do in hope of securing future contracts.21 But the military may forgo much or all of their profit margin in order to bring on board big businesses whose expertise, industrial plants, or capital they need. Political factors also play a role: when the president sets deadlines that push costs beyond the allocated budget, the MOD may absorb the resulting losses from its own funds. This was the case with the construction of the cathedral in the new administrative capital, which Sisi wanted finished in time to celebrate Coptic Christmas in January 2019. What all this suggests is that the military’s net income from the public works projects it manages approximates the aggregate amount by which the profit margin of private contractors is reduced.

Estimating net military income from national and megaprojects is virtually impossible, therefore. But it will not continue at the inflated levels seen since 2014, as the pace of new projects is declining. Military agencies benefited from the huge construction surge of housing and infrastructure—managing nearly 24 percent of projects announced by the government, if official statistics are accurate—but this may have plateaued as government figures show a decline in the rate of new projects from EP500 billion annually in 2014–2016 to EP224 billion annually through the end of 2018.22 However, it is also unlikely that military incomes will drop to pre-2013 levels, when the MOD earned more modest income from managing long-term projects such as the Toshka land reclamation scheme. This is because the MOD and its subordinate agencies have been assigned to manage projects such as the new administrative capital, Sisi’s 1.5 million feddan reclamation, and East Port Said development zone indefinitely, and will no doubt be assigned a significant role in the construction of at least fourteen new desert cities in coming years, and so their overall management portfolio will remain several times larger than it was before 2013.

Evidence of profitability is less convincing for the MOMP, MOD companies, or the AOI. Even though the MOMP reported impressive sales growth of 276 percent between the 2014–2015 and 2017–2018 financial years, from EP4.2 billion to EP11.6 billion, in dollar terms this went more modestly from $552 million to $649 million, or 18 percent. And according to Assar, who provided these figures, fourteen of the MOMP’s twenty companies were still recording net losses in 2018.23 He did not specify which companies were profitable, but it is likely that these produced intermediate chemicals, in which they have cornered the Egyptian market and contributed to exports, or else have provided contracting and management services, thanks to their captive market of government contracts. MOD companies such as the Alexandria Shipyard have yet to post profits, and there is no publicly available evidence that the AOI is performing better, despite sporadic boasts of new contracts and healthy sales.

Increases in turnover should have improved balance sheets across the board, but gains would partly have been offset by the commensurate rise in the total cost of factors of production, continued low productivity, inadequate research and development, and the need to invest in modernizing industrial plants and processes. And even in loss-making enterprises, EAF officers in management positions and other employees possibly receive a share of income under the profit-sharing provision stipulated in the regulations of military businesses, prior to calculating net profits, if indeed there are any. Furthermore, military businesses apparently manipulate budget rules and laws that allow them to carry surpluses forward from year to year—even as they post operating losses that are charged to the state treasury—in order to build up substantial deposits in discretionary funds (discussed below).

Military businesses have clearly faced continuing difficulties in adding value in most areas of manufacturing, but might achieve healthier results in the extractive sectors into which they are currently expanding. According to their statements, the MOD’s Mining Sector and related NSPO companies are set to produce, or at least control, a major share of the country’s total output of marble and granite, gold, minerals, and heavy metals, and are expanding their share of phosphate production. In part, this is done with the purpose of increasing revenue for the state treasury, but the military agencies involved will presumably receive either a management fee or a set share of net income—whether allocated formally or asserted as a de facto tithe. But the military is not the only actor in any of these sectors—with the possible exception of heavy metals—and would have to force out the domestic and foreign-based private companies that currently dominate them. Yet this may prove costly, certainly politically but also financially (as the military investments in the media, steel, and cement sectors discussed in Chapter 5 indicate).24

Banking and Black Boxes

Contrary to the defense budget, which is deposited with the Central Bank of Egypt, the MOD places at least a portion of its income in a variety of Egyptian banks; “one billion here and half a billion there,” according to an anonymous source in the central bank.25 Deposits are possibly managed by the MOD’s Financial Authority, but even in this case the extent of its authority over military financial assets is unclear: it is not represented on the board of directors of a major economic actor such as the NSPO, for example, nor does it hold the military-owned shares in companies such as al-Tharwa.26 Indeed, subsidiary MOD agencies such as the NSPO are also empowered by law to open and manage their own accounts in state-owned commercial banks, and probably manage these independently.

As importantly, the MOD holds a significant portion of its funds in dollar deposits. In late 2011, for example, it loaned the central bank $1 billion to help shore up the Egyptian pound.27 Its easy access to large amounts of dollars was based on a law in force since at least 1984 allowing it to purchase and retain “free currency” in order to finance its imports and investments and to settle dues to suppliers.28 But in May 2013, Major General Mohamed Nasr, then assistant defense minister for finance, also justified MOD retention of foreign currency deposits as a means to assist civilian authorities to tackle “emergencies.” According to the same article, which claimed to be citing him directly, he also revealed that the MOD had refused a request from then president Mohamed Morsi for $2 billion in foreign exchange to help the government deal with worsening shortages of electricity, fuel, and other basic commodities.29 As a leading banker complained, the military’s special privilege made them “a state within a state, with their own hard currency supplies.”30

The MOD and other military agencies also retain special funds in which they deposit budget surpluses—denominated in Egyptian pounds, since they are part of official budgets—which a great many civilian government agencies do as well. More infamously known as “black boxes,” special funds were established by a series of presidential decrees issued in the 1970s onward. This offered a perverse incentive for public institutions to charge capital investment costs and operating losses to the state treasury, while showing net budget surpluses that they were allowed to place in special funds and defer from one financial year to the next. The rare publication of the annual accounts of the MOMP’s NAMP and a few other EAF agencies in 2011 revealed that they followed the same practice.

As Nizar Manek and Jeremy Hodge found in an impressive piece of investigative journalism, special funds are held at the central bank, but neither the latter body nor the Ministry of Finance or Central Accounting Organization (CAO) has any oversight or regulatory power over them.31 According to former police finance officer turned whistleblower Abdel-Khaleq Farouq, there were 600 special funds (containing EP500 million) by 2000–2001, rising to 1,045 by 2003.32 In 2012, Nasr gave their number as 7,000, with EP35.5 billion (then nearly $6 billion) in deposits, while Manek and Hodge estimated that the special funds held the equivalent of at least $9.4 billion two years later.33 The military’s share cannot be determined with any confidence, but Manek and Hodge claimed that special funds worth about $4.9 billion in the 2010–2011 fiscal year belonged to state economic agencies with close ties to the military—such as the Suez Canal Authority, General Authority for Petroleum, and, not surprisingly, the AOI.34

In May 2017, Major General Safwat al-Nahhas, member of a recently formed administrative reform committee, confirmed that special funds still lacked organizational structures and statutes, making them “no more than companies belonging to the [state] entity that owns the funds.”35 Unwittingly, he echoed the late Samer Soliman, political scientist and founding member of the Egyptian Social Democratic Party, who in 2011 had described the transformation of state institutions in the Mubarak era into “autonomous financial fiefdoms.”36 What uses military special funds are put to remains the subject of speculation, but as a 2018 report by Transparency International on security funding mechanisms in Nigeria showed, discretionary funds of this kind may exceed significant parts of the regular national defense budget, if not the whole of it.37

The MOD may additionally control funds that originate outside the black boxes. In February 2015, a leaked conversation between Sisi and his chief aide Major General Abbas Kamel showed that the president planned to deposit $10 billion of assistance from Gulf states in the MOD’s account.38 Whether the Gulf donation went to its general account or a separate special fund is unclear, but the MOD is almost certainly one of the state agencies authorized to receive foreign donations in its special funds.39

Equally probable is that the military was exempted from a government decision in 2013 transferring 6,061 special funds worth a cumulative EP38.6 billion (around $5.7 billion) to a unified account in the central bank. The military was probably again automatically exempt from a subsequent decree issued by Sisi in July 2014 requiring “service, economic, and national general authorities” that had special funds to contribute 10 percent of their annual income to the state budget.40 The mandatory contribution was later raised to 25 percent in the 2016 budget law; as a public business sector entity, the NAMP would normally have been subject to the law, but was explicitly exempted.41 The depreciation of the Egyptian pound in the meantime would have significantly reduced the value of the special funds in dollar terms, so the military’s exemption from making similar contributions probably served only to offset part of the loss.

Standing legislation since at least 1984 authorizes military borrowing from banks, companies, and other bodies—including foreign ones—and lending to companies. Economic analyst Abdul-Fattah Barayez assessed that the MOD had not in fact taken loans of this kind until the end of 2015, nor competed with the private sector for credit.42 But this has started to change, as military acquisition of steel companies since then has shown. The MOD has also invested capital from state-run bodies in projects it manages, a significant example being the investment by the National Authority for Social Insurance and Pensions in the MOD-managed Toshka land reclamation scheme.43

Companies in which the military has a commercial interest are also known to have benefited from preferential access to loans. In a Carnegie Endowment for International Peace paper, Shana Marshall noted the example of a subsidiary of Tharwa Petroleum, in which the military has a direct stake, that was able to borrow $20 million from the National Bank of Egypt in 2014: having done little business with the state previously, the subsidiary swiftly won two major concessions.44 The desire to maintain bank support for poorly performing state-owned companies, including any with military affiliations, may help explain then defense minister Tantawi’s opposition to the proposed privatization of Cairo Bank in 2004.45 That this remains a problem was revealed by the Egyptian National Maritime Transport Company, an MOD affiliate that was found to have racked up major debts in the years running up to 2016.46

Accounting Without Audit

EAF spokespersons and senior defense industry officials routinely state that military businesses, “be they agricultural, services, industrial, or other, are subjected to taxation and monitoring by the Central Accounting Organization, like any other company in Egypt.”47 Ahmed el-Sayed al-Naggar, a senior economist at the state-owned Ahram Center for Political and Strategic Studies, bluntly responded that such claims “are at complete variance with the truth.” The logical outcome of each government ministry running its own economic activities, he added for good measure, was to dismantle the state and inflict an injustice on the Egyptian people.48

That was in 2012, but little has changed since then. Generally, defense sector officials are guilty of conflating accounting—tracking inflows and outflows of funds and balancing the financial sheets at the end of each reporting period—with auditing—the more demanding verification of financial statements for the purposes of identifying financial risk areas and assessing controls, processes, and information flows and thereby the overall efficiency of management and other systems. The former is conducted internally, while the latter is usually done by bodies external to and independent from the agencies under inspection.

Military agencies duly keep their financial books but do not appear subject to anything constituting a full audit.

Military agencies duly keep their financial books—as does the MOD for the EAF and other affiliated departments—but do not appear subject to anything constituting a full audit. Still less does the CAO or any other specialized government agency evaluate the ability of military agencies undertaking economic activities to attain performance targets, resolve problems, and alter or redesign processes to improve results. Further impeding effective evaluation of performance is the lack of transparency regarding whether newly acquired or established companies count as assets or expenditures in military books, and whether the latter show outstanding dues as debts or rather as arrears, which may be carried forward from year to year. This appears to be the accounting method for MOMP companies, at least, helping to explain their significant cumulative losses. Delaying payment to civilian contractors indefinitely is similarly a means of portraying military-managed projects as efficient and profitable, as the high-profile case of Amlaak Holdings that came to light in August 2019 demonstrated, whose owner claimed it was owed EP225 million for construction work done for the military.

The MOD appears to have managed the accounts of all agencies under its umbrella until around the turn of the century. But as military involvement in the civilian economy accelerated at that time, a special Ministry of Finance office was established within the MOD to review the books of the EAF- and MOD-affiliated agencies and companies engaged in nondefense production and public works.49 According to a knowledgeable source, however, the special office simply reports overall expenditure and income, suggesting that its main task is to balance the books rather than conduct detailed audits.50 This interpretation was supported by the interim minister of finance in 2011, Samir Radwan, who complained that his ministry could only track allocations of public funds to government agencies and report actual spending, but lacked detail and could not evaluate that spending; defense-related agencies were subject to even less monitoring.51

The MOMP may similarly undertake bookkeeping through its own accounting department, but the fact that the head of the MOD’s Financial Authority sits on the board of the MOMP’s NAMP suggests that its budget and financial operations might also come under review by the same Ministry of Finance office at the MOD.52 However, the head of the “state general budget sector” at the Ministry of Finance, a retired EAF major general, is also a board member, indicating an extra level of involvement. In either case, this is apparently what enabled Assar to claim that his ministry’s budget is audited by the CAO “under supervision of the Ministry of Finance.”53 (The AOI, by way of contrast, does not come formally within the scope of any audit agency, as it retains the status of an international organization and is therefore governed only by its own by-laws, even though it may allow CAO inspections on a voluntary basis.54)

Whatever the merits or demerits of this accounting setup, it falls short of an audit, even less an independent one. Defense officials claim otherwise. For example, then assistant defense minister for finance Nasr stated in March 2012 that “we submit to the Central Accounting Organization . . . which sends hundreds of monitoring committees annually.”55 An unnamed military source provided greater clarity in 2015 by stating that the CAO reviewed military economic activities related to providing “public services” specifically, a nuance later confirmed by Assar, who stated that MOMP companies paid taxes, customs duties, and social security contributions on their production for civilian markets.56 How the distinction is verified and maintained is unclear, assuming it is at all; similarly, equipment and materials acquired for production are likely to benefit from the military’s broad range of tax and customs exemptions regardless of whether their end-use is military or civilian.

This distinction apparently allowed the CAO, which has no jurisdiction over defense-related bodies, a circumscribed window into the formal military economy. Speaking in early 2014, CAO head Hesham Geneina gave military companies a clean bill of health. But his call two years later for “a legislative revolution” to empower state audit bodies brought him into conflict with Sisi; a committee appointed by Sisi to investigate Geneina accused him of using “incorrect and imprecise data, endangering public peace and weakening respect for the state and confidence in its institutions,” and in March 2016 he was removed from office.57

Weaponized Audit

The CAO has been eclipsed completely since then by the Administrative Monitoring Authority, whose head, former EAF officer Major General Mohamed Erfan Jamal-al-Din, led the investigation of Geneina.58 Established by then president Gamal Abdel Nasser in 1958 and upgraded in Law 54 of 1964, the AMA’s mandate is to combat corruption in any government agency or private company involved in public works. For decades its remit effectively excluded the defense sector, but in 2017 Sisi ratified an amended Law 207 that made this exclusion official by limiting the AMA’s scope specifically to civilian agencies.59 This act removed the last vestigial claim that any defense-related agency—outside of its public business sector companies—comes under external audit by any state agency.

Thanks to its powers of judicial investigation, the AMA is Egypt’s most powerful audit agency, which successive presidents have used to punish opponents and keep supporters in line. Sisi has similarly used it as what one Egyptian journalist called his “striking arm,” underlining his public commitment to stamping out corruption while ensuring obedience.60 In April 2015, he removed Major General Mohamed Omar Heibah, who had only headed the authority for two and a half years (instead of the normal four), to replace him with Erfan, Sisi’s fellow graduate from war college in 1977.61

The AMA has always been headed by EAF officers (seconded during active service), who also lead many of its operational divisions and twenty-nine regional branches.62 Law 112 of 1983 reflected the extent of this inter-penetration by establishing a conversion table for all commissioned military ranks into their equivalent bureaucratic grades, and carrying over the pay, allowances, and seniority of EAF officers transferred to the authority.63 As former AMA investigator Moatassem Fathi described it in 2014, the agency “operates like an intelligence service whose officers mostly come from the military or police, and enjoy vast powers of interrogation, search, and surveillance.”64 This leaves the EAF Inspection Authority as the only body authorized to investigate corruption in the military; cases are tried exclusively by the military tribunal, ensuring they do not enter the civilian justice system even for nonmilitary charges.65

Since assuming the presidency, Sisi has consolidated the AMA as an instrument of presidential power.66 In 2015, a decree issued by the prime minister designated it “a state agency whose procurement contracts should be kept secret for national security considerations.”67 And in October 2017, parliament agreed to end the authority’s autonomous status by empowering the president to hire and fire its head, granted the rank and benefits of minister to the AMA head, and exempted it from the provision of Social Security Law limiting pensionable pay to 80 percent of final basic salary (thereby raising the allowable ceiling to 100 percent).68

The AMA’s public profile has risen in parallel. Erfan, whose tenure was renewed for a further four years on March 31, 2017, broadened his portfolio by visiting infrastructure projects and speaking about national economic development.69 In the meantime, Lieutenant Colonel Mostafa el-Sisi, the president’s son who was transferred from the EAF to the AMA after his father took office, won unusual publicity for a middle-ranking authority official by being credited with delivering several high-profile cases.70 Progovernment media burnished his credentials, celebrating him as a “torchbearer” and “strongman” who has dealt “a painful blow to the ‘corruption mafia’ in Egypt,” suggesting he is being groomed to head the authority eventually.71 Erfan’s standing appeared secure after the president assigned the AMA to resolve tax disputes valued at EP900 billion in July 2018, but his abrupt dismissal only a month later lent weight to predictions about Mostafa el-Sisi’s swift rise.72

Sisi has clearly used the AMA to disown corrupt networks and burnish his own credentials, but continues to use it selectively, and has not tackled the discretionary powers and opacity that enable systemic corruption in Egypt. AMA involvement in reviewing tenders and bids for public works managed by the EAF since the end of 2015 has probably resulted in tighter scrutiny of the terms of reference for contracts awarded to private companies, but does not constitute a meaningful audit of military economic activity and finances. Indeed, the AMA’s teaming up with the EAF Engineering Authority may provide a means of circumventing government rules, a pet peeve of Sisi, who bluntly castigated the state’s administrative apparatus as “an obstacle to Egypt’s progress” in 2015.73 He was equally scathing of feasibility studies, stating three years later that “in my estimate, if I had followed [them] and allowed them to be a decisive factor in resolving matters in Egypt, we would have achieved only 20 to 25 percent of what we actually achieved.”74

Whistle-blower Abdel-Khaleq Farouq’s description of Egypt’s wider security sector (defense, interior, and justice) in 2008 remains apt today. It is “characterized by opacity and complete lack of transparency under pretexts of ‘national security concerns,’ allowing ‘cancerous’ expansion in administrative-organizational and economic-financial terms, giving rise to a multi-tentacled nature and incomprehensible organograms.”75

Parliamentary Abdication

The inability (and unwillingness) of the People’s Assembly to exercise oversight of the defense budget or any other aspect of defense affairs merely confirms the military’s lack of accountability to civilian authorities. For decades, parliamentarians were allowed only to approve the defense budget as a one-line item, without receiving a detailed breakdown. The Supreme Council of the Armed Forces strove to curtail even this minimal parliamentary prerogative following Mubarak’s ouster, by issuing a constitutional declaration in June 2012 that required the defense budget to be submitted only to the National Defense Council (all but defunct since its establishment under the 1971 constitution).76 This limitation was reaffirmed in the revised constitutions passed by referendum under the Morsi and Mansour administrations in 2012 and 2014. Sisi has occasionally convened the council since assuming the presidency and established a general secretariat based at the MOD to routinize its work in July 2014, but it is not clear that the council has ever reviewed the defense budget.77

The inability (and unwillingness) of the People’s Assembly to exercise oversight of the defense budget or any other aspect of defense affairs merely confirms the military’s lack of accountability to civilian authorities.

In any case, dissent was rare in the politically subservient People’s Assembly. The fact that an attempt by representative Elwy Hafez to expose corruption in defense procurement in 1988 is still remembered today shows how exceptional it was. His efforts finally led to a debate in 1990, but even this was subsequently excised from the parliamentary record.78 Twenty years later, Ayman Nour, a former member of parliament who ran unsuccessfully against Mubarak in the 2005 presidential election, took advantage of the 2011 revolution to oppose a draft supra-constitutional framework document proposed by the ruling SCAF. Arguing that this would “gift the nation to the army,” he rejected maintaining “‘black zones’ in the general budget, over which there is no monitoring or review or accountability.” He also demanded that “expenditure on armament, defense production, with what expenses this entails” be discussed in a dedicated parliamentary committee. As for “for-profit companies, cement, car, and washing machine companies and mineral water companies, and National Service Projects,” these “should be subject exclusively to public regulations.” Otherwise, he warned, the EAF would be “transformed into a state within the state,” and Egyptians “a nation for the army rather than an army for the nation.”79

The military pushed back. In March 2012, assistant minister of defense and SCAF member Major General Mokhtar al-Molla insisted that the defense budget would remain exempt from parliamentary oversight.80 A month later, assistant defense minister for constitutional and legal affairs and SCAF member Major General Mamdouh Shahin argued that “previously the military budget was subject to specific laws and was not in any constitution.” By proposing constitutional amendments exempting defense from parliamentary debate, he added, “I am simply asserting a reality that has existed for a long time. What is the problem with that?”81 Their colleague Nasr openly boasted a year later that he had blocked efforts by the Muslim Brotherhood and allied Islamists of the Nour Party to bring the defense budget (and the NSPO) under parliamentary scrutiny.82

Despite these objections, a very broad breakdown of the defense budget was submitted for the first time ever to the Shura Council (the Senate) in April 2013. This was three months prior to the council’s dissolution by court order during the brief interlude of the Morsi administration.83 But the exception only proved the rule. In April 2012, the Muslim Brotherhood–dominated parliament approved the decree issued by SCAF head Tantawi in May 2011 awarding the MOD the power to determine whether EAF officers accused of illicit gains should be prosecuted in civilian or military courts.84 And in October 2017, parliament approved draft Law 207 that explicitly limited audit by the AMA to civilian agencies alone, making the exemption of military agencies from its remit de jure for the first time ever.

A historically supine People’s Assembly has become openly complicit with the military.

A historically supine People’s Assembly has become openly complicit with the military. Former EAF, police, or security officers won eighty-four parliamentary seats in the 2015 election, at least seventeen of whom sit on the Committee on Defense and National Security.85 This has assured military economic agencies of vocal support in the People’s Assembly, not that this has ever been in doubt. When asked about the MOMP’s foray into medical manufacturing in October 2016, for example, several representatives praised this as “a guarantee of quality.” Another called for the MOD to oversee Egypt’s health sector in its entirety, arguing this would “guarantee 100 percent success . . . and reveal 90 percent corruption [in the existing sector].” He added, for good measure, “if the army were to take the country in hand we would become like Europe within one year.”86 And one parliamentarian who acknowledged that use of conscript labor in military companies gave them a competitive advantage over the private sector, nonetheless endorsed their constant expansion on the grounds that they fill “an economic void to provide goods that the state could not provide.”87

An altercation during a debate on July 25, 2016, demonstrated parliament’s relationship with the military vividly. In question was a proposal to increase military pensions, which are charged to the general budget. Addressing the MOD representative who was attending the session, the head of the parliamentary committee on human rights (and nephew of the late president) Mohamed Anwar Sadat objected that “we know neither the basic salaries nor the pay scale [of the EAF], so how can we increase [pensions]?” The main problem, he continued, was not knowing what salaries and pensions were awarded from the (general) budget to officers “who hold civilian positions as ministers, governors, mayors, or chairmen of authorities and companies.”88 At this point the Speaker of the House forcibly silenced Sadat, who some months later was stripped of his parliamentary seat.89 The speaker was himself to gain a brief moment of international notoriety when, in October 2019, he likened Sisi’s ambitious development strategies to those of Nazi Germany, saying that “Hitler had his mistakes, but what allowed him to expand eastward and westward was that he created a strong infrastructure.”90

Parliamentary abdication enables the military economy in significant ways. The Planning and Budget Committee, for example, judged that it could not review the budgets of megaprojects managed by the military. “The rules that apply to the armed forces budget also apply to the budget of the new Administrative Capital for Urban Development Company,” Member of Parliament Yasser Omar told investigative journalist Beesan Kassab.91 He justified this particular case on the grounds that it “does not take a single piaster from the state budget,” which is both erroneous—since the government provided some initial funding and the company’s start-up capital came from the ministries of defense and housing—and misleading—since NUCA and other civilian authorities involved in fact receive official public funding, albeit under a budget for general authorities that is separate from the state budget. Other officials, including Sisi and the spokesperson for the company managing the administrative capital project, added the further justification that its development was financed solely from the proceeds of land sales. Parliament has tacitly allowed this wholesale transfer of usufruct over state land and assets and the revenues deriving from them to privileged institutional actors. It similarly withheld from seeking clarification when Sisi acknowledged the use of public funds to construct multiple presidential palaces around the country in September 2019 and vowed to build more, claiming “Those aren’t for me. Nothing is for me . . . they are for Egypt.”92

The Wages of Impunity

The EAF has assiduously cultivated an image of financial probity and rectitude, for the most part successfully as the adulation of the members of parliament quoted above confirms. This contrasts with the widespread perception—actively if informally propagated by military personnel—that corruption pervades its civilian counterparts, whether in the private or public sectors. Mismanagement of state assets and national resources and outright corruption have been structural features of Egypt’s economy since the EAF established the republic—rather than an aberration. To paraphrase analyst Thomas de Waal’s assessment of corruption in Ukraine, the problem is not that a well-functioning state has been corrupted by certain illegal practices, but rather that those corrupt practices constitute the rules by which the state is run.93 But the notion that the military has been able to remain a bastion of integrity amid a sea of corruption for decades is neither convincing nor borne out by the facts. Rather, anecdotal evidence, insider accounts, and public revelations of the kinds cited below indicate extensive and routinized corruption within at least those parts of the defense sector concerned with procurement and supply, licensing civilian functions of any kind, and public contracting and services.

Sisi has repeatedly identified corruption as a major challenge in public, noting that it will take considerable time and effort to resolve.94 He has moreover recognized that this affects major state institutions; for example, he acknowledged to a senior U.S. State Department official cited by journalist Peter Hessler that he was unable to tackle corruption in the police because “it’s a million-man mafia.”95 But another senior U.S. official involved in the formal relationship with the Egyptian MOD argues that this also works to Sisi’s advantage: “As a former Director of Military Intelligence, he is intimately familiar with the military economy in all its dimensions . . . [and] knows where the metaphorical bodies are buried.”96 Indeed, according to Transparency International, the risk of corruption has worsened since he assumed the presidency: Egypt scored consistently between 32/100 and 37/100 in its overall Corruption Perception Index for 2014 and 2018, keeping it in the poorly performing end of the index.97

Major General Michael Collings, who served as senior U.S. defense representative and chief of the Office of Military Cooperation in Cairo from 2006 to 2008, later told the New York Times that corruption was endemic in the senior EAF officer corps. He asserted that “a fair amount” of the income of formal military businesses “goes back to the senior officers that are in charge of these particular factories.” Collings also revealed that, according to EAF counterparts he met during his posting, Mubarak used to disburse cash payments to the commanders of the four EAF services (Army, Navy, Air Force, and Air Defense Forces), a claim confirmed separately to the New York Times by a high-ranking EAF retiree.98 The pattern extends all the way down the chain of command: conscripts who can afford to reportedly pay bribes to be assigned to units or locations they prefer—up to EP15,000 in 2015 (then $2,000).99

Legal immunity is further reinforced by the formal prohibitions placed on divulging information relating to the military, starting with Law 313 of 1956 and replicated in more general legislation such as Presidential Decree 35 of 1960 on the Central Agency for Public Mobilization and Statistics and the National Archives and Intelligence Law 100 of 1971.100 Transparency International’s Government Defense Anticorruption Index concluded that the procedures and mechanisms in place to prevent corruption put Egypt in the top category of countries where the risk of defense sector corruption was “critical” in every category it measured.101

Insider accounts reveal that this is an actuality, not mere risk: there is an established pattern in the MOD financial administration of approving invoices known to be fraudulent, for example, and procurement officers routinely demand bribes for the award of contracts. Anecdotal evidence moreover shows that bribe amounts have risen sharply since the military takeover of 2013, reflecting the military’s enhanced leverage. Indeed, inhibitions linked to notions of legality have weakened further, resulting in what might be termed rapacious entrepreneurship: greater awareness of opportunities for extra income-generation and boldness in extracting it from civilian actors. A foremost example is military intrusion into the operation of the government investment company that provides seed capital to startup companies, imposing officers onto their boards or extorting a share in equity (reportedly up to 20 percent) in return for approval of funding.

There is considerable cumulative evidence of these practices, stretching back for decades. Political scientist John Waterbury noted in the early 1980s that “senior EAF officers traded on their influence, pocketed kickbacks on everything from citrus exports to arms purchases, acquired property and income through appropriations or management of sequestered properties.”102 Fellow political scientist and Egypt expert Robert Springborg corroborated reports from foreign contractors working in Egypt that similar lucrative practices in that era centered on major ports for leasing of quays, permission to offload cargo, and filing fraudulent insurance claims for damaged goods.103 EAF officers were still supplementing their incomes thirty years later by taking fees in cash for routine services they control such as passage through the Suez Canal, according to foreign diplomats interviewed by journalist Matthew Axelrod in 2011.104 In March 2014, a private importer of satellite receivers complained openly of having to pay thousands of dollars in bribes to EAF officers working with the Suez Canal Authority in order to release his recent shipments.105 And ships transiting through the Suez Canal were routinely compelled to hire local crews to facilitate their crossing, in addition to paying smaller tips and bribes.106

Extracting illicit income occurs wherever the military controls physical or regulatory access. Businessmen confirm that they have regularly been asked to donate to MOD funds in return for receiving permission to register land or change its use since 2001, or to pay outright bribes. Applications relating to land use are moreover often made to local EAF commanders rather than an authorized MOD department—let alone to the Ministries of Local Development, Trade and Industry, or Finance, any of which would be the more obvious authority—creating opportunities to demand bribes, especially from smaller businesses. But public sector and government agencies are no less afflicted: insiders confirm that the Housing Ministry, for example, has routinely paid bribes amounting to millions of Egyptian pounds to MOD officers in return for approving land use applications for publicly funded schemes.

Control over borders offers other lucrative opportunities. Since 2014 especially, agricultural produce of military-owned farms in the Farafra and Bahriyyah oases that used to be sold to government agencies is reportedly being sold in Libyan black markets instead. Local clans operate large convoys of goods in both directions across the border with EAF knowledge; soldiers serving in the area report being told by their commanders which to intercept and which to protect.107

Corruption is so prevalent in the wider economy and administration that officials routinely identify fighting it as a priority. In 2010, for example, Admiral Mohamed Ibrahim Youssef, then head of the Holding Company for Maritime and Land Transport, stressed this fight as one of the company’s key social corporate responsibilities—alongside serving society, securing its workers’ rights, and protecting the environment.108 But much of the reported fraud or mismanagement takes place in sectors in which the military claims primacy. For example, a study commissioned by the Cabinet of Ministers in 2009 concluded that the development plan for Sinai, which the MOD leads in setting priorities and implementing, had fallen short by 70 percent on its goals in agriculture; 66 percent in industry, mining, and petroleum; and 86 percent in water and sanitation. With no hint of irony, North Sinai governor Major General Munir Shash attributed this failure to corruption.109

Local government is seen to experience the highest levels of corruption within the executive branch of the Egyptian state. It is also a branch that has been heavily penetrated by armed forces retirees.

Local government is commonly perceived to experience the highest levels of corruption within the executive branch of the Egyptian state.110 It is also a branch that has been heavily penetrated by EAF retirees; much of the corruption revealed over the past decade has clustered around seaports, airports, and ground transport infrastructure—all bastions of the officer’s republic. In 2011, the AMA found that the Port Said Port Authority and Maritime Transport Sector of the Ministry of Transport had awarded a series of contracts, extensions, and exclusive terms to the Suez Canal Container Transport company since 1999 that would result in losses to the state treasury of $489 million (including $350 million in future earnings); responsible were three retired major generals who headed these agencies at the time.111 Port Said was again the focus of a corruption investigation in 2015, when the governor of the province, another retired major general, was accused of fraudulent import dealings.112

In the same year, the head of the National Maritime Navigation Company, Vice Admiral Nabeel Lotfi, announced that fifteen years of declining performance had left the company EP100 million in debt and with only eight ships out of an original fleet of seventy by 2015; he did not explain this, but in Syria similarly severe depletion of the state-owned merchant fleet was due to fraud.113 Lotfi was replaced by yet another vice admiral the following year, and the government transferred the company to the newly created public business sector.114 And in February 2016, a former assistant to the Navy commander and head of the Port Said Port Authority was sentenced to five years imprisonment for accepting bribes.115

Civil aviation, a fiefdom of the Egyptian Air Force in the way the Suez Canal and ports are the Navy’s sinecure, has been similarly afflicted. Retired Air Force Major General Atef Abdul-Hamid headed the Company for Maintenance and Technical Services of the national carrier EgyptAir and then EgyptAir itself before becoming minister of transport (from 2011 to 2013), at which point the Illicit Gains Agency charged him and a deputy of illegally receiving EP4 million in profits from the aviation services company.116 In April 2015, the CAO head Geneina publicly stated he was “appalled by the extent of corruption in the airport,” which he blamed on “corrupting and beneficiary cliques.”117 The AMA ordered the removal of the new head of the Holding Company for EgyptAir for financial violations and then announced a “cleanup” of the Holding Company for Civil Aviation on Sisi’s instructions at the end of August.118

Domestic food supply is another obvious candidate for fraud. The MOD claimed to be producing up to 60 percent of EAF requirements of food, uniforms, and other consumable goods by the late 1980s and was selling its surplus produce in domestic (and, it claimed, export) markets starting in the early 2000s. And yet it continues to import considerable quantities of the same commodities or to purchase them from local suppliers. As with the import of commodities such as wheat, sugar, and medicines, MOD procurement officers and favored commercial agents may extract significant profits from pricing differences between open markets and subsidized military production. Most prominently, several EAF retirees who headed the Holding Company for Food Industry or advised the minister of supply were arrested in May 2018 on charges of accepting bribes worth EP2 million. The AMA was reported at the same time to be investigating several of the company’s subsidiaries.119

Rotating discredited officials from one job to another has been a standard response when mismanagement or fraud can no longer be disguised.

Rotating discredited officials from one job to another has been a standard response when mismanagement or fraud can no longer be disguised. The revolving door does not always reflect corrupt practices, but it has routinely hidden debt arising from poor performance as well as fraud. Once again, this has a long history. In 1986, for example, the head of the board of directors of the MOMP’s Factory 360, was accused of misappropriating funds, conducting secret deals with foreign companies, and gifting company property “to high officials in various sectors of the state,” for a total loss of EP20 million (then $28.6 million) in two years.120 Another military company—AOI subsidiary Kader—claimed to have dismissed corrupt officers in 1998 and 2004, only to have its director tried in 2011 for receiving bribes from Mercedes-Benz in return for awarding supply contracts.121 In 2012, the AMA referred former AOI chairman Major General Sayyed Meshaal himself for prosecution for allegedly awarding contracts above cost.122

The legal umbrella that shields EAF officers—whether in active service or retired—from scrutiny also protects them when they face challenges. For example, the head of the Holding Company for Silos and Storage, a retired EAF major general, was charged with fixing contracts in 2011, and then again in 2012 for burdening the company with fraudulent legal expenses, but remained in his post until the company’s general assembly finally referred him to prosecution in 2016.123 Similarly, a retired EAF major general who headed the Company for Sale of Egyptian Products and was also charged in the holding company fraud case in 2011, reappeared on the company board following its merger with the publicly owned Sidnawi Company in 2018.124

That the cases listed above reflect a pattern rather than an exception is highlighted by the AMA’s own record. Its role in protecting senior officials from investigation during the Mubarak era embedded it in the regime’s crony networks, and inevitably several of its own heads were accused of corruption, while those who did not conform were penalized.125 In 1996, for example, Major General Ahmad Abdul-Rahman was reportedly replaced after insisting on pursuing a corruption case against then housing minister Ibrahim Soliman that the president wanted dropped.126 But Abdul-Rahman, too, was subsequently accused of heading several housing companies in partnership with a Saudi prince and then selling their assets for his own gain.127

Abdul-Rahman’s successor as AMA chief, Major General Hitler Tantawi, apparently proved more pliant in serving Mubarak’s wishes, as he received three one-year extensions after the end of his normal four-year term in the post. After retiring in 2004 (with the Medal of the Republic, First Class, awarded by Mubarak), he was accused of abusing his position to illegally acquire subsidized officer housing and land in high-value development zones, reportedly registering some of these properties in the names of his children and grandchildren.128 Tantawi was followed by Major General Mohammad al-Tohamy, whose tenure was similarly extended four times after it had ended in 2008. The final extension was decreed by SCAF head Field Marshall Mohamed Hussein Tantawi in December 2011, despite accusations that Tohamy had ordered the shredding of documents relating to corruption in the Mubarak era.129

Tohamy was eventually dismissed in September 2012 by then president Morsi. This followed accusations by whistle-blowing AMA officer Lieutenant-Colonel Motasem Fathi that Tohamy had blocked investigations into retired EAF officers, including a governor of North Sinai and a minister of military production as well as current members of the SCAF, who Fathi claimed had made up to $7 million from smuggling subsidized fuel.130 Tohamy himself allegedly received “millions of pounds” in gifts from state companies, and used AMA funds to purchase gifts for ministers and Mubarak’s family.131 (Tohamy was also Sisi’s mentor in Military Intelligence, and was eventually rewarded by being made head of the GID immediately after the military’s takeover of power in July 2013.132)

The new AMA head appointed by Morsi, Major General Mohamed Omar Heibah, projected a different image by openly acknowledging that the “marriage of capital and power” under Mubarak had obstructed the AMA from carrying out its duties properly.133 He also revealed that Morsi had taken the unprecedented step of making the presidency subject to AMA audit, and teamed up with the CAO under Geneina in a joint investigation of illegal encroachments on state land, which were reported in October 2015 to have cost the public treasury EP440 million in lost income.134 But Heibah’s tenure was cut short when Sisi replaced him midterm with Erfan.

Lower-ranking AMA officers have moved into lucrative consultancies in government agencies and state-owned enterprises on retiring, including in companies they had previously audited. A press report in February 2009 revealed, for example, that former EAF officer Major General Samir Yousef had moved from auditing al-Qawmiyya Construction Company to consulting for it; it later appointed him to head the committee that took its well-known subsidiary company, Omar Effendi, back into public ownership in 2013.135 Also joining him at al-Qawmiyya Construction was Major General Hamdi Rashed, formerly AMA deputy head. Major General Mohamed Amin Abdul-Ghani similarly went from being assistant AMA head to heading Misr Company for Car Trade.136

With so many overlapping and potentially competing military agencies and jurisdictions, individual officers may easily claim they are the legitimate authority to license one activity or prohibit another.

Sisi may have curbed the potential for mismanagement and fraud in military-managed public works when he ordered the AMA to team up with the EAF Engineering Authority in late 2015. But the effects can only be partial, both because the relationship between the AMA and EAF is so intimate and because the AMA focuses on the formal paperwork of tenders and invoices. This does not necessarily impede the opportunity to cream profits from outsourcing the actual work to private subcontractors and from procuring or supplying materials and equipment for projects, which as Ayman Emam argues offers the larger opportunities for fraud.137 And as this section has shown more generally, there are few other barriers to the involvement of EAF officers in a range of corrupt practices given their extensive penetration of public sector agencies and local government, their exclusion from audit by the AMA or any other civilian agency, and their quasi-assured immunity from prosecution in civilian courts. With so many overlapping and potentially competing military agencies and jurisdictions, individual officers may easily claim they are the legitimate authority to license one activity or prohibit another. But as the example of extorting equity from startup companies in return for approving their applications for venture capital showed, even such legal niceties are weakening.

Notes

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