From capitalism to consumerism: Hossam Tammam*
outlines the history of MB finance
The recent confrontation between the regime and the outlawed Muslim Brotherhood (MB) once again sees the spotlight focussed on the financial practices of the largest and most powerful Islamic group in Egypt.
In April 2008 40 MB leaders were convicted by military courts in an obvious attempt to break the financial backbone of the group. The government liquidated several MB-run companies and imprisoned successful MB businessmen including Khairat El-Shater, the second deputy of the MB general guide, and his business partner Hassan Malek.
In the case known as the "international organisation", which started in June 2009, the government seems to be targetting MB economic power once again. Prosecutors have indicted several MB-affiliated businessmen, charging them with money laundering and receiving funds from abroad to finance the outlawed group.
The escalation in the economic confrontation poses several questions. What is the nature of the MB's economic activities? What is the financial history of the MB? And where is the dividing line between what the MB owns and what its members own?
Since its inception the MB has been big on finance. On a purely theoretical level, MB founding father Hassan El-Banna said the group should be an "economic company" just as it is a "Salafi inspiration, a Sunni method, a Sufi revelation, a political organisation, a sports society, a cultural league and a social idea".
On a more practical note, El-Banna wasted no time in forming a number of companies and economic enterprises, most of which were either directly helpful to MB activities or related to his pan-Islamic vision. El-Banna believed in a national liberation movement with an Islamic orientation, and this vision influenced the type of investment on which MB companies focussed. He formed a mining company and a textile company at a time when Egypt was still a major supplier of raw cotton to British factories. We don't know whether those companies were owned by the MB itself or by individuals affiliated with it, or a mix between the two. But we know that the MB was allowed to own companies at the time.
It didn't take long for the leaders of the 1952 Revolution to fall out with the MB. In 1954 the Revolutionary Command Council decided to disband the MB and confiscate its offices and property. Another clampdown in 1966 ensured that the MB had no tangible public role left.
Under Gamal Abdel-Nasser MB economic activity was halted. The most its sympathisers could do was to collect donations at home and abroad for the benefit of the families of its imprisoned members.
Businessmen preferred to distance themselves from the MB. For example, Talaat Mustafa made sure that his business was not affiliated with the MB in any way. But we know that some MB members preferred to work for certain companies, especially the Arab Contractors, owned by Othman Ahmed Othman, whose sympathies with the MB go back to the pre- revolutionary era.
Othman provided many MB members with support and financial backing. He also hired some MB members to work on projects abroad, especially in Libya and Saudi Arabia. In return, the Gulf-based MB elite gave the Arab Contractors their full support.
Among the hundreds of MB members living abroad, some were known for their business acumen, including Abdel-Azim Loqma, Youssef Nada, Helmi Abdel-Meguid, and Mustafa Moemen. Some say that Akef El-Maghrabi, owner of the well-known chain of optician shops, had close links with the MB at one point. Ironically, the MB flight from Egypt helped its members accumulate wealth and hone their business skills.
Things changed once Anwar El-Sadat came to power. Sadat ended the clampdown on the MB and liberalised the economy in a way that gave returning MB businessmen an edge in the ensuing boom. As the centrally- planned economy was dismantled, consumerist needs were unleashed with a vengeance and business opportunities multiplied.
MB capital acted without delay, investing in housing, health, education, transport, food and many other services. By the end of the 1970s a new class of MB-affiliated businessmen was taking shape in Cairo. A network of businesses linked with the group soon emerged. The MB was particularly active in real estate investment, medical supplies, school supplies, automobiles and food production. All of these areas were once monopolised by the state but were now open for private investment. MB economic activities filled up part of the gap left behind by the withdrawal of the state, making the transition to a market economy less painful for the public.
Soon the MB tried its hand at tourism, especially organised pilgrimages to Mecca, management and training, electronics and information technology. The man who organised the MB's branching out into these new fields of economic activities was Khairat El-Shater. He was one of the first MB businessmen to venture into management (having formed the Umma Centre in the late 1980s) and computers (the well- known Salsabil Company).
Unlike MB investment under Hassan El-Banna, which was part of a national liberation quest (forming a textile company under British occupation was a daring act, in the same league as the nationalisation of the Suez Canal), investment in the liberalisation period took on a consumerist nature. As of the 1990s, the largest MB investments were directed at luxury housing and North Coast tourist resorts.
Although the past two decades saw the rise of an MB and non- MB Islamist business class with a major economic role in the country it couldn't assert its newly acquired power in public. It never assumed the high profile Islamist businessmen in Turkey adopted under Necmeddin Erbakan. Turkish Islamist industrialists and bankers have their own association, MUSIAD, which currently controls 12 per cent of the economy and is generally viewed as the economic arm of the ruling Justice and Development Party.
Whether the low profile in Egypt had to do with the timidity of the Islamist business community or the nature of the political, which frowns upon business associations of a religious type, the outcome was clear: the business community has little influence on MB decisions and not much say in the country's political scene.
El-Shater was the only exception. A brilliant businessman, El-Shater also had immense organisational skills that placed him at the top of the MB's organisational hierarchy (he is currently the second deputy of the general guide). El-Shater is the first MB leader to combine economic and organisational power. As such, he is more than a businessman and a successful MB leader, and his influence within the MB is substantial.
It is hard to estimate the real economic power of the MB. The legal ban on the group makes it difficult to know the size of its membership. Also, businessmen may not want to reveal the extent of their affiliation with the group. It is also common for outsiders to confuse the money available to the group with the wealth of its members, hence the tendency to exaggerate the MB's financial power.
Since the 1950s the MB has lost most of its assets, except minor ones related to Islamic schools and publishing houses (Dar Al-Daawa and Al-Madina Al-Monawara schools in Alexandria and the Islamic Distribution and Publishing House and Al-Radwan schools in Cairo). MB members are also known to invest in publishing and education, but the assets involved are private, not MB-owned.
One can therefore say that the actual economic assets owned by the MB are limited and confined to cultural activities. These assets, of course, are subject to state confiscation at any time.
As a group the MB has no substantial assets and most of the economic institutions that have been subject to security and legal action of late are owned by MB members, some of whom have leading posts within the group, such as El-Shater, Hassan Malek, Sanaa Youssef Nada and Ghaleb Hemmat.
We have no proof that the assets in question are actually owned by the MB or that the individuals in question are acting as a façade for the group. Still, these assets add to the power of the group, if only for the simple reason that MB members are required to give the MB a certain percentage of their income, thought to be around eight per cent. Businessmen are also known to make voluntary donations to the group and to fund specific activities.
The MB encourages its members to invest in areas that help the group's activities. But this doesn't make the group the owner of the assets in question. Take, for example, Bank Al-Taqwa. The bank was a private project owned largely by MB members, though the MB itself had no assets in the bank. The MB was instrumental, however, in setting up the project, for it supports this type of banking on principle.
If people tend to confuse assets owned by the MB with assets owned by its members, there is a reason. It is common for MB businessmen to market their products as if they were affiliated with the MB. With a lot of purchasing power in the hands of Islamist sympathisers, this is a profitable business ploy. But businessmen may also take this approach as a precaution against market fluctuations, or even political vicissitudes. Should things go wrong they can always blame the state.
* The writer is an expert in Islamist movements.