In a four-decade military career, Osama Abdel Meguid served in the first Gulf War and was an assistant military attaché in the United States.
These days he issues orders from an office that overlooks the Nile, as chairman of the Maadi Co. for Engineering Industries, owned by the Ministry of Military Production.
Maadi was founded in 1954 to manufacture grenade launchers, pistols and machine guns. In recent years the firm, which employs 1,400 people, has begun turning out greenhouses, medical devices, power equipment and gyms. It has plans for four new factories.
“There are so many projects we are working on,” said Abdel Meguid, a 61-year-old engineer, listing orders including a 495 million Egyptian pound ($28 million) project for the Ministry of Electricity and an Algerian agricultural waste recycling contract worth $400,000.
Maadi is one of dozens of military-owned companies that have flourished since Abdel Fattah al-Sisi, a former armed forces chief, became president in 2014, a year after leading the military in ousting Islamist President Mohamed Mursi.
The military owns 51 percent of a firm that is developing a new $45 billion capital city 75 km east of Cairo. Another military-owned company is building Egypt’s biggest cement plant. Other business interests range from fish farms to holiday resorts.
In interviews conducted over the course of a year, the chairmen of nine military-owned firms described how their businesses are expanding and discussed their plans for future growth. Figures from the Ministry of Military Production – one of three main bodies that oversee military firms – show that revenues at its firms are rising sharply. The ministry’s figures and the chairmen’s accounts give rare insight into the way the military is growing in economic influence.
Some Egyptian businessmen and foreign investors say they are unsettled by the military’s push into civilian activities and complain about tax and other advantages granted to military-owned firms. The International Monetary Fund warned in Sept. 2017 that private sector development and job creation “might be hindered by involvement of entities under the Ministry of Defense.”
Egypt’s government counters that private companies are operating on an even playing field and that the military is filling gaps in the market, as it did during a shortage of infant formula in 2016. Then the military helped by importing supplies and has since announced plans to build a formula plant. Sisi says the military can deliver large, complicated projects faster than the private sector.
In 2016, the military and other security institutions were given exemptions in a new value-added tax (VAT) law enacted as part of IMF-inspired reforms. The law states that the military does not have to pay VAT on goods, equipment, machinery, services and raw materials needed for the purposes of armament, defense and national security.
The Ministry of Defense has the right to decide which goods and services qualify. Civilian businessmen complain that this can leave the system open to abuse. Receipts for a cup of coffee at private sector hotels, for example, add 14 percent VAT. Receipts at military hotels do not. Employees at the military-owned Al-Masah Hotel in Cairo told Reuters that no VAT was charged when renting venues for weddings and conferences.
Neither the Egyptian government nor the military responded to Reuters requests for comment for this article.