General Managers and Generals – a Healthy Egypt.

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General Managers and Generals – a Healthy Egypt.

Post by Hafiz »

General Managers and Generals – a Healthy Egypt.

Everyone knows that the Armed Forces run companies (they are nominally owned by the taxpayer who pays all the costs but sees nothing of the profits) that are between 5% -40% of the Egyptian Economy (most say 20%-30%), that hundreds of the military are ‘hidden’ deputies of government departments (difficult to be precise), that overseas investors ‘feel’ the need to enter a joint enterprise with the military rather than go it alone and that the majority of Governors are military but I had not known how many military/generals ran private sector companies – although Farag, the eternal failure, runs a few (into the ground) in his 8th decade and with no relevant experience let alone competence as a manager. Naguib Sawiris has publically said its 40% but that is a few years ago and he is a less than reliable source of anything.

Everyone also knows that Mubarak’s ’97 'law' (possibly in breach of the constitution) gave 90% of Egyptian land to the Army and all the minerals, and coastal hotel sites, that go with it. Why they were given the land is not clear because no other Army in the world was given land let alone this huge amount. What they gave back isn't clear. Maybe they were being rewarded for their many military victories – none known, a 100% defeat rate.

Here is an article from a reputable and progressive US magazine from 2014 – I suspect the number of Generals in the private sector is higher now

“Fattened on the patronage of successive military presidents, Egypt’s military-industrial complex had grown enormously. Its contribution to the gross domestic product (GDP), though a state secret (why is it a state secret – how is Egypt’s security improved by this secret), could be as high as 40 percent, unparalleled in the region. The chief executives of fifty-five of Egypt's largest companies, contributing a third of that GDP, are former generals.” ... uncle-sam/

A better than usual MEMRI related article. ... al-economy

Its getting a bit like Hitler in 1940 – is there anything left to take over? France.

A recent and partial study analyzed how the generals managed government departments/agencies – including ones where they have no skills or experience. Its not the full picture of their power and incompetence. . It gives a more detailed approach and shocking evidence of the manipulation of the markets for essentials for personal benefit/prestige. Here it is:

“Take for example the “Health Sector” network. Our investigation and analysis showed that the Egyptian army has a strong influence on Ministry of Health through two minister assistants: Hisham Abdelraouf (Primary Health Care Assistant) and Elsayed Shahed (Financial Assistant). Both used to have official positions in army-affiliated agencies. This has eventually led to rewarding the army’s agency “Armed Forces Medical Services” with key projects to the Egyptian economy.

In most projects, the armed forces contracts with private sector companies, which are connected in a way or another to the army. As an example, importing the children/infants milk project was given to Pharma Overseas Company (which is a shambles of a drug company but purports to be private sector) whose Chairman of Board of Directors is Ahmad Jazzarin, the brother-in-law of Vice Admiral Mohab Mamish, chairman of the Suez Canal Authority and former Commander of the Egyptian Navy. Speaking of the infants milk project, the army acquired it through what is thought to be a planned plot by eliminating all existing importers in the market and then manipulating the Egyptian public to ask the army to step in.

Moving to the other competitor, the Egyptian General Intelligence Directorate (EGID), our analysis has shown that there are two key private sector companies linked to EGID that handle large scale projects in the health sector (what the hell do they know about health): The Egyptian Pharmaceutical Trading Company and Wadi El Neel For Medical Services. Until now, EGID’s influence in this sector is not as strong as the army’s. However, it is rapidly growing and it is clearer in other sectors. EGID influences MoH through the “Drug Planning and Policies Center”.

Drawing the “Health Sector” network allowed us to visualize and understand the links behind the conflict between “Pharma Overseas Company” and “Multipharma Group” over the Hepatitis C Sovaldi Drug Importing. Such a conflict is part of the army’s struggle, along with its affiliated companies, to eliminate the private sector companies and declare maximum dominance over the health sector. (This story is enormously complex and involves the theft of an international copyright and the ridiculous and failed health tourism project for HepC sufferers involving the lock-jaw Messi and the several million Euro he got for ‘appearing’ in Egypt to promote this fiasco)

We applied similar analysis to other sectors, in which more complex patterns were identified. For example, in the “food sector“, we were able to identify a French and a Russian conglomerates (almost mafias) that dominated the wheat imports business. The former was backed by the General Intelligence Directorate whereas the latter was backed by the army. This was achieved through visually grouping relevant entities into communities, based on specific criteria and the availability of the data.

Studying the “tourism sector“, we were able to identify, through path-following, how the Egyptian armed forces leased important touristic spots to one of its authorities and directly competed with the private sector, creating unfair competition in its quest to completely dominate the whole sector. (Their tourist investments are much larger than thought and extend well beyond the score or two Armed Forces Hotels and the so called guest houses)

Similar findings were created by studying the “petrochemicals, energy and minerals“, “communications“, “industry“, and “national projects” sectors. Also, we studied the organization hierarchy/structure of the army. Finally, we produced another interactive visualization showing the ruling families of Egypt since 1952. This has been covered in articles that we published” ... rettyPhoto

This view is more extreme/full throated than some but contains factual details which check out. In broad terms I think its right. It is part of his 12 section analysis 11 parts of it are only in Arabic. There is nothing in his language or data which seems extreme or biased – he digs in a field others have done for decades and finds no more than more of the same everyone else had found.

He uses modern technology and a methodology which he explains in full to map Egyptian influence and control in a much more systematic way than journalists and academics. What the author tries to do is to show the total system of influence and control and all the loops and feedbacks that are part of making it work – work for the insiders. Journalists typically focus on a single transaction. He uses modern visualizations of networks to argue his point. Here is one example of links/networks between the Minister’s assistants and army agencies in relation to projects.

One weakness is his focus on individuals and insufficient attention to corporate structures, their registration, the lawyers they use, their location but a deal of this is hard to find and difficult to interpret. He also ignores the difficult to trace suitcases full of cash. The possible strength of it is the focus on personal, blood and marriage relationships which is the glue that keeps Egypt together - at least in the ruling classes. Business in Egypt is often about relationships rather than business with people you don't know - no matter how good they are.

Unlike most others he goes well beyond the Mubarak inner circle – although that detail is mainly in the Arabic sections.

The strategy of military economic expansion and driving out/driving broke the private sector isn’t new and has been complained about by the private sector in Egypt for a while. ... 05_nll.pdf The attitude of the military government is that they don’t trust the private sector and only trust themselves. Its also an attitude which conveniently means ‘someone’ has the economic power – and the profits and jobs. It is also clear from other sources that there is huge infighting between elements on the military over money/assets/businesses. If this energy was instead directed at the military/terrorist enemy Egypt would be a safer place.

How the military justifies all this commercial activity is a mystery. It can’t be the national interest because the Egyptian economy has tanked in the last 70 years of military leadership and is probably the worst performing economy in its category in this period in the world. Therefore military management has failed in both military and commercial terms.

There are also recent purchases of TV stations by the Army and their influence and control in this sector is likely very large but hard to nail down. It also seems that they have recently taken over the Toshka assets from the feckless Saudi Prince Talal (Possibly 100,000 acres) for a trivial payment and add this to their already very large farm assets – all in breach of the legal limits on acreage to be held by one person/organization. As everything they do is subject to only military law I guess they can ignore the laws that apply to everyone else.

Where else in the world do governments think Generals make good managers of companies? Neither Churchill, Roosevelt or Stalin got generals to do other than manage armies

Its amazing how the best generals in history, but not Egyptian generals, never wanted to manage companies but some of the worst in some countries are desperate to do so.

Even the Russians and Chinese worked out that high state ownership or control of the civilian economy produced bad outcomes. Harold Wilson also knew that – but did nothing about it. Most countries got generals out of business – Indonesia and China are good recent examples that led their economies to improve. Pakistan has military dominance in the economy which explains why it is a basket case.

No sane country on earth ever thought the army were good managers of civilian enterprises – let alone petrol stations, pasta factories, hotels or farms. Some generals aren’t even much good at managing military matters – except in their self interest. Command and control techniques, top down thinking, ignoring cost/benefit, strict hierarchy and discipline and blind obedience aren’t great approaches to business but do explain the ‘taste’ for military style grand projects.

Pillage, incompetence, corruption and ignoring Egyptian needs means that Egyptians will stay poor and Egypt continue its 70 year slide into economic insignificance as the rest of the third world passes it by.

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Re: General Managers and Generals – a Healthy Egypt.

Post by Major Thom »

A good post Hafiiz telling lots of truths.

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