Tuesday, January 2, 2024

Armed and poultry

Country-style duck from Mohamed Naguib Military Base

In Egypt, you can buy duck from the military. You can also buy soap, get a hotel room, or buy a stove. Egypt ranks 114th in the World Bank's Ease of Doing Business ranking. Out of 190, but nonetheless unimpressive. My dad shared a book with me analyzing the military economy there. From: "Owners of the Republic: An Anatomy of Egypt’s Military Economy" by Yezid Sayigh from the Carnegie Middle Eastern Center.

The defense sector (The Ministry of Defense, Egyptian Armed Forces, Ministry of Military Production, and the autonomous Arab Organization for Industrialization) moreover exercises very considerable discretionary powers. Over the past four decades it has acquired, and in some instances appropriated, the right to award commercial contracts, make substantial investments, and “gift” funds or other assets—such as land, bridges and highways, and food—to other state bodies, quasi-governmental organizations, and the general public, without requiring prior approval or subsequent ratification from any external authority. Nor do military agencies have to coordinate with any state body responsible for economic planning or management when designing or implementing their own trade, production, and investment strategies; forming business partnerships; or disposing of the proceeds.

The Egyptian military claims that they can deliver at lower costs, break monopolies, and that the army must be an economic actor in order to use excess military capacity. None of that is verifiable. The military is accountable to no one and transparent to no one, and is just a continuation of cronyism of the past. 

Sayigh leads with historical analysis of the position of the military in Egypt since Egypt became a republic. Most important to the current events in Egypt is probably the way the military was treated in the later Mubarak regime. Mubarak did not want the military in control, so he sidelined them. 

Instead it was crony businessmen close to Mubarak, his son Gamal, and the ruling National Democratic Party who reaped the principal benefits of privatization (in the 2000s), capturing market share in important economic sectors and overshadowing the military as the source of political connections sought by both public and private companies to win contracts. This loss of influence was a factor in the military’s discomfort with, and at times open opposition to, privatization of key state assets and the grooming of Gamal Mubarak to succeed his father, setting the stage for its siding against him during the 2011 uprising.

Cronyism and rentierism is bad, regardless of the form. Successful development stories do not include the military operating large segments of the economy. I have not finished reading the book, but I am intrigued and will try to read through it. 

The most grandiose megaproject is Sisi’s plan to build an entirely new administrative capital for Egypt, to be managed by the EAF. Other edifice projects include the Suez Canal expansion, relaunch of the Sheikh Mohammed bin Zayed “new urban community,” and construction of three new “smart” cities (so-called because they use digital technology to improve energy efficiency) and at least four conventional desert cities. As these examples show, the Sisi administration remains as doggedly attached as all its predecessors since 1952 to a top-down, state-led development model and as resistant to alternative approaches proposed by the private sector, independent experts, and international agencies. The haste with which the administration dusted off and implemented the plans for expansion of the Suez Canal, which the Mubarak administration had shelved at least twice, dramatically demonstrated that attachment.

The most interesting thing about the new Egyptian status quo of the military baking cookies and cake with no checks and balances is that Sisi is powerless to stop this, to some extent. Sisi may have his desires, but he is not entirely in control of the military.

Rosy assessments of Egypt’s macroeconomic indicators issued by Egyptian officials and their counterparts in Western governments and international financial institutions disregard fundamental problems of low productivity and innovation, limited value added, and insufficient investment in most economic sectors. These officials may be hoping Sisi can somehow build a successful development dictatorship, which would explain why they gloss over the social consequences of his administration’s economic approach and its fierce repression of political and social freedoms and egregious human rights violations. A corollary is the faith that the military is as good an economic actor and manager as it claims to be, and that it will withdraw from the economy as the latter grows. Yet current trends suggest Sisi will remain hostage to key partners in the governing coalition, including the military leading its involvement in the economy to accelerate.

Dictating is apparently not easy. History has definitely had some interesting dictators, including Lee Kuan Yew of Singapore and other "benevolent dictators." Sisi seems like a low-skilled dictator, at least economically. Having to crack down on dissent is usually bad. I think if you are going to be a dictator, you should at least attempt to have a good performance in order to quell opposition, and avoid saying stuff like "if the cost of progress is hunger, then we will not eat."