Egypt's conscripts serving the army's economic empire

Egypt's conscripts serving the army's economic empire
11 min read
05 Sep, 2017
The long read: Instead of creating paid jobs for civilians, Sisi is using Egyptian army conscripts to build his engineering megaprojects. The private sector is not happy, writes Jamal Boukhari.
Egyptian army soldiers build a fence along a buffer zone [Getty]
For the Egyptian army, the country's huge numbers of conscripted soldiers constitute a workforce that is practically free and can be exploited at will. 

It draws on their ranks to service its interests and the numerous structures and industries it controls across the country.

On April 30 2017, in a meeting room of the Federation of Egyptian Industries, a general from the army-owned National Service Authority (NSA) met behind closed doors with representatives of the Chamber of Mines and the marble industry. He informed them that the NSA had begun building four large marble production facilities to be added to three existing factories.

The aim was to produce a million square metres of marble, 80 percent of the country's total output. The general explained that the army would finance the project, provide the labour and ensure its speedy completion, but it would require the expertise of the factory owners.

The industry representatives were shocked. Ihab Mahmoud said the move could mean the closure of his factory, already suffering from the recession following the 2011 revolution. He said the military's decision would mean thousands of job losses in the sector.

The incursion of the army into the marble industry came on the heels of its control of the mines. A 2014 government decree in effect authorised the army to work and manage most of Egypt's mines. The army's first move following the decree was to triple the price of the right to mine.

The incursion of the army into the marble industry came on the heels of its control of the mines

This aggravated the existing crisis in the sector. According to Mohamed Abdel Maqsoud - an investor in the marble industry and member of the Chamber of Mines of the Federation of Egyptian Industries - the power of the army means that as a potential competitor it could destroy what remains of this bankrupt industry.

During the meeting he commented: "the army will get the raw materials for free, use labour provided by conscripts, won't pay for transport, won't pay taxes or customs duty. How are we meant to compete with that?"

The NSA is one of the economic agencies created and managed by the army.

Its presence can be seen everywhere. It is involved in the construction of a new Suez Canal and a megaproject for a million new homes. It manufactures construction materials, manages most of the country's motorways, imports medicines and wheat, makes domestic appliances and provides security and construction services.

It manages a network of large clubs, the first local fishery in the country and media outlets. It is inescapable, with interests in nearly every branch of the economy. The private sector is seriously concerned.

Army involvement in the Egyptian economy is nothing new.

Under President Gamal Adel Nasser, army officers managed most of the businesses and factories in socialist Egypt, though they had no control over private enterprises. The economic ambitions of the army became fully apparent during the presidency of Anwar Sadat (1970-1981). The crisis in Egypt after the Arab-Israeli war of 1973 was the spur for military intervention in non-military production.

'The army will get the raw materials for free, use labour provided by conscripts, won't pay for transport, won't pay taxes or customs duty. How are we meant to compete with that?' - investor in the marble industry

Sadat gave the green light to the establishment of structures called "authorities", which would produce foodstuffs for the army and sell the surplus on the local market. Sadat's aim was to reduce military spending, which was pressing heavily on the post-war budget. In doing so, he unknowingly created a behemoth that would go on to become the country's most powerful economic actor, swallowing up more than 40 percent of the economy, according to some analysts.

The omnipresent 'authorities'

The NSA, created in 1979, consists of 52 companies active in the sectors of agriculture, construction, food products and petrol stations. During the final months of Mohamed Morsi's government, Egypt experienced a critical petrol shortage which caused great public alarm. After the fall of Morsi, the NSA was able to take control of a large network of petrol stations across the country, managing them under the brand name "Watania" (patriotism).

In 2014, the authority began the national transport of meat, poultry and other food products produced by the army. It organised a huge programme of sales fairs to market its products, sold more cheaply than those of its private sector rivals, thanks to the state facilities it could draw on free of charge.

Read more: Tyranny grants populism new life in Egypt

The NSA also incorporates Queen Service, a security, caretaking and hotel management firm. In 2013, following the student demonstrations against Morsi's overthrow, the Ministry for Higher Education handed the security of universities over to private companies.

Queen Service and another security firm called Falcon obtained the security contracts for most of the country's public universities. In July 2013, Queen Service was also contracted to provide security for the metro stations of greater Cairo, for a sum of 12 million Egyptian pounds ($680,000) a year.

Next to Saad Zaghloul station in central Cairo is the headquarters of a brigade of conscripts on military service. They're actually working for Queen Service, their mission to provide security for the metro stations of Cairo.

A soldier called Eid* explains: "I'm going to spend my two years of military service as a security guard on the metro. I'm lucky compared to the conscripts who are fighting at the front in North Sinai."

Eid wakes up early to work his daily 7am to 3pm shift. He doesn't know he's doing his compulsory military service for a private company. "After the 45 days of training at the beginning the people in charge of the camp sent me and the other conscripts here," he says.

The second army authority to be created was the Arab Organisation for Industrialisation (AOI), formed in partnership with the Gulf States after the 1973 war. After Egypt signed a peace treaty with Israel, the Gulf countries withdrew from the partnership.

As well as the manufacture of military materials, the organisation is also active in five civil fields, according to its website: Water purification and treatment, railways, car manufacture, industrial equipment and solar and wind energy. The organisation also comprises the Simaf group, local partner of the French group Alstrom, which makes Egypt's trains and Cairo's metro trains.

Behind the economic empire is another army: that of the conscripted soldiers who do the actual work for all of these businesses and projects

The National Organisation for Military Production (NOMP) is the third army authority involved in civil production. Comprising 18 military and civil factories, it plays an important economic role in Abdel Fattah al-Sisi's Egypt.

In July 2016, Egypt suffered a medicine shortage because of lack of access to dollars. On 22 August, in response to the crisis, the Health Ministry authorised NOMP to construct Egypt's first laboratory for the production of anti-cancer medication.

The laboratory will meet 95 percent of the national demand for cancer drugs. Two months later, an agreement was signed for the production of medical and veterinary vaccines.

In July 2016, the Health Ministry also agreed a partnership with NOMP for the purchasing of imported medicines. The organisation now imports materials and products for hospitals and universities across the country, from syringes and solutions to electrocardiograph equipment.

In December, Egypt was hit with another shortage: Infant milk. In response to public outrage, the health minister announced that the army, through NOMP, would distribute 30 million cartons of imported milk to chemists.

The military authority is also involved in the manufacture of household appliances. In June 2016, it signed a partnership agreement with the Chinese group Galanz for the manufacture of domestic air conditioning units. There months later, the Egyptian authorities placed restrictions on the importation of air conditioning units.

The military authority closest to the president's heart is the Armed Forces Engineering Authority. This is the organisation he uses to realise his grand ambitions, notably the megaprojects he judges an essential part of the creation of a secure, modern economy.

The organisation's work focusses on infrastructure and construction, but its activities began to diversify in 2014. In March of that year, even before being elected president, Sisi announced the construction of a million housing units, a project to be managed by the Armed Forces Engineering Authority.

'The army pays no taxes or customs duties, so its involvement in the civil sector is a disaster for private companies - Ahmed Fadl, former conscript

In August 2014, two months after his swearing in, he proudly launched his megaproject for a new Suez Canal, to be constructed in one year and aimed at doubling the canal's revenue. He naturally selected the Armed Forces Engineering Authority to implement the project.

At an economic conference in Sharm-el-Sheikh in March 2015, President Sisi revealed another of his flagship projects: the 'New Capital', an immense town, resembling Dubai, to be constructed to the east of Cairo. The Armed Forces Engineering Authority was again the preferred provider.

Two months later a new organisation came into being, the Administrative Capital for Urban Development (ACUD), a partnership between the military authority and the Housing Ministry. The ACUD - the director of which is an army general - is now in negotiations with a Chinese partner to make Sisi's dream a reality.

In January 2016, Sisi approved the development of 1.5 million acres of desert. The Armed Forces Engineering Authority will be in charge.

The conscripts that are 'all profit'

Numerous reports and investigations have charted the economic empire of the Egyptian army. While Sisi claims it only represents 2 percent of the country's economy, some commentators put the figure at 45 percent. They accuse it of exploiting the powerful networks of former army generals who now head ministries, governorates and services to ensure it is prioritised in public procurement.

But behind the economic empire is another army: that of the conscripted soldiers who do the actual work for all of these businesses and projects, including the megaprojects so dear to the president. These soldiers are becoming the mainstay of economic activity for the army and the regime.

Military service is obligatory for Egyptian men between 18 and 30. It lasts for between one and three years, depending on the person's level of education. Some conscripts find themselves on the front line in a fierce war against Islamic State (IS) in the province of North Sinai. This conflict has claimed hundreds of their lives. Others are sent to work in service industries, factories, clubs, bakeries and other army projects.

Sisi plans to make the new city, 45km east of Cairo, into Egypt's new administrative and financial capital [AFP]

Mohamed Ali has just finished his two years of service, which he spent working in a blanket factory. He says: "I didn't expect to do my military service in a factory. The only time I wore a military uniform was for the 45 day training. The rest of the time I've been a labourer, but practically unpaid." Mohamed Ali was paid 300 Egyptian pounds a month (about $17), which is the conscript's payment.

During his military service, Ali woke at 7am every morning and worked in the factory until 5pm, alongside civilian employees. "There were civilian workers there, but their job was to supervise or train the conscripts," he says. "That should not be the role of a conscript. Instead of giving the jobs to civilians, and paying them, they're using us. They're saving a lot of money in salaries."

According to figures from Egypt's Central Agency for Public Mobilisation and Statistics (CAPMAS), the unemployment rate had reached 12 percent by the first trimester of 2017. Among 15-29 year-olds it was as high as 79 percent.

Ahmed Fadl, a former conscript who spent his military service constructing the new Suez Canal, explains: "the problem for me is that conscripts are not paid for the work they do. If there is no other solution, there should be a civil service, not military service."

He also considers using conscripts in civil projects to be economically problematic for the country: "The army pays no taxes or customs duties, so its involvement in the civil sector is a disaster for private companies. Not to mention the effect on job creation."

On the subject of working conditions, the case of the military subcontractor Tersana comes to mind. The company built three French corvettes at the port of Alexandria, on a site run by the French DCNS group (Direction de la Construction Navale et des Services).

It sacked most of its workers in May 2016 when they protested about working conditions. The projects were completed by soldiers.

In September 2016, the monopoly of the army on the importing of infant milk began to have a major impact on the Egyptian Pharmaceutical Trading Company (Egydrug), previously the only importer of that product.

The new military monopoly was described by Karim Karm, spokesperson for the company, as a "fatal blow". The company had been importing the brand of milk in question for decades. Karm confirmed that the fate of his 5,400 workers was threatened.

* Names have been changed to protect the anonymity of interviewees.

Jamal Boukhari is a pen name. 

This article was first published by our partners at Orient XXI. 

Opinions expressed in this article remain those of the author, and do not necessarily represent those of The New Arab, its editorial board or staff.