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How effective is the U.S. aid to Egypt?

On February 5, 2012, Egyptian media officials reported that 40 people, including 19 Americans, had been referred to trial on charges that they illegally provided foreign funding to non-governmental organizations in the country. Those being referred to trial were banned from leaving the country until investigations into whether these groups were operating illegally in Egypt were completed. Among these organizations were the National Democratic Institute (NDI), and the International Republican Institute (IRI), which have been operating in Egypt since 2005. The government of Egypt justified its crack down on foreign, non-profit organizations with receiving illegal foreign funding, and interfering in the political process in the country and encouraging Egyptians to protest on the current regime.

However, on February 29, 2012, the Egyptian authorities decided to let the suspects leave the country after paying bail, after months of heated negotiations, and after the US government threatened to withhold the $1.3 billion in military assistance and $250 million in economic assistance it gives annually to Egypt.

Despite the slight easing of the conflict over the US funded interference in the Egyptian politics, the issue raised another heated debate in the streets and public opinion in Egypt regarding the agenda behind the U.S. aid given to Egypt, primarily, whether it is helping to achieve the country’s developmental goals or not. Many believe that the billions of U.S. dollars that have been pumped into Egypt since 1979, after the signing of the Camp David accords, have done little under the economic and military assistance schemes but to serve the Country’s socioeconomic and political development. Instead, some claim, it served as a tool for the U.S. interference in the Egypt’s internal affairs.
The history of U.S. aid to Egypt dates back to 1975 when USAID set up its mission office in Cairo to pursue the organization’s traditional goals. Its aid policy focused at that time on agriculture and food production, nutrition and health, population and family planning, and education and Human Resources. The policy had a special focus on the role of women in the society, and promoting their socioeconomic and political development. The amount of aid was initially modest but by 1979 reached $ 245 million with the conclusion of the Camp David Accords and the bilateral peace treaty with Israel.

The U.S. aid to Egypt took a new form, where it represented a reward to Sadat for signing the Camp David Accords and the Egyptian-Israeli peace treaty, and its role went beyond issues of equality, basic human needs and poverty to a large scale economic growth. Since that time, Egypt has been the largest recipient- after Israel- of American economic and military assistance. The U.S. aid given to Egypt at that time was primarily for diplomatic reasons. However, it was channeled through USAID through developmental projects. The diplomatic concerns were the decisive factors to determine how much aid to be channeled to Egypt.

After the treaty, the U.S. role in the Middle East-and specifically in Egypt-changed from a mere aid-donor to holding the monumental task of assisting the government of Egypt in rebuilding the war damaged economy .Aid was channeled towards developing a modernized urban infrastructure (sewers, telephones, transportation, utilities, port facilities) to support the economic growth, promote the private sector in a state controlled economy and to satisfy the basic human needs in a society where the government had already done much to establish a far reaching minimum. The U.S. also took the role of promoting a complete overhaul of the economy through drastically reforming foreign exchange and interest rates, government procurement policies and monopolies, massive subsidization of food and energy consumption, stabilizing population growth, protecting the environment and building democracy. All this was led and controlled by the USAID desire to have a major voice in the implementation of the process, a voice that is supposed to be supervisory, not dictatorial.

Throughout the last three decades, Egypt has been receiving foreign assistance from the U.S. through two main programs, the Economic Support Fund (ESF) and the Foreign Military Financing (FMF). The ESF is administered by USAID-Egypt and is claimed to be directed towards three strategic objectives: (1) to bolster the trade and investment environment; (2) develop competitiveness skills in the private sector; and (3) increase access to sustainable utility services.

On the other hand, the FMF is entirely administered by the U.S. State Department and specifically by the Bureau of political-Military affairs. The FMF provides grants for the acquisition of U.S. defense equipment, services and training. It is intended to promote U.S. national security by contributing to regional and global stability and claims to be strengthening military support for democratically-elected governments.

The table below shows the Amount of Aid received by Egypt under the ESF and the FMF from 2001 till 2006

TABLE 1. Amount of Aid received by Egypt under ESF and FMF ($ in millions)
Year ECONOMIC MILITARY TOTAL
2001 693 1,297 1,990
2002 775 1,300 2,075
2003 615 1,300 1,915
2004 571 1,292 1,863
2005 530 1,289 1,819
2006 495 1,300 1,795

SOURCE: (Federation of American Scientists), Washington, DC

Even under the ESF- which was administered by USAID, the American Congress played the leading role in influencing policy directions, such as the priority given to certain micro enterprises, or the shape and extent of family planning activities funded with the U.S. aid. The particular views and interests of individual members and their staffs played a role. The preferences of their constituents contributed towards USAID policy directions in Egypt. An important note has to be mentioned here that these decisions were made under a limited familiarity of the policy makers (in the White House or in Congress) with conditions (culture, morals, attitudes, institutional relationships) in recipient countries.

Although the aid given through the ESF had some positive impact on Egypt's economic growth, where the GDP grew at an average of 8.4 percent from 1978 to 1982 compared to 4.3 percent for 1960-1978, that growth didn’t last for long. The GDP growth rate slowed to roughly 5 percent between 1984-1987, and it hovered around 2 percent in the 1990s .The U.S. economic aid to Egypt, which amounted to $455 million in 2007, translated to only $6 per capita. With U.S. economic aid to Egypt cut to $200 million for 2009, the per capita share was a measly $2.60 in a country with an average gross domestic income (GDP) per capita at current prices of about $1,697 in 2007 and $2,184 in 2008, according to the World Development Report of 2009.The sharp increase was partially attributed to the high inflation rate of 11.8 percent in 2008. If calculated using Purchasing Power Parity (PPP) that adjusts for the relative purchasing power difference between the Egyptian pound and the dollar, the average per capita income in Egypt was $5,352 in 2007 and $5,400 in 2008. Therefore, in per capita terms, U.S. economic aid to Egypt was barely a drop in the bucket. Egypt continued to sink in heavy debt obligations- even with the huge amount of aid it received from the U.S. - where the amount of foreign exchange needed just to cover Egypt's debt obligations rose from 35.1 percent in 1984 to 45.8 percent in 1996. In 2012, unemployment rates remain above 20 percent and underemployment is rampant. The price of transport, electricity, food, housing and health care is rising dramatically with no relative increase in wages and salaries. One economist at Cairo University estimated that the percentage of people living below the poverty level increased from 30 percent in 1959 to 34 percent in 1984 to 51.1 percent in 1992.

One cannot deny that Egypt has benefited from American aid—fewer children die from diarrheal disease, sewers do not overflow, telephones work, water quality has improved and agricultural production has increased, among other successes. USAID administrator J. Brian Atwood is correct when he points to these improvements as part of the progress Egypt has made in the last 20 years. But to compare such small progress with the billions of dollars of aid being pumped to Egypt since the 1970s, one may realize that the socioeconomic development wasn't the main goal, but a peripheral one. Certainly Egypt hasn’t become a major economic development success story, unlike other middle-income "newly industrialized countries" such as Brazil and South Korea, two graduates of American aid programs.

Although all the indicators point out to the partial failure of the U.S. aid to Egypt to achieve its developmental goal, one cannot only blame the U.S. government for such failure. In fact, the major responsibility falls on the government of Egypt for the institutionalized corruption and the failure to set national development priorities and strategies to claim the ownership of aid. The absence of some other factors have also contributed to this failure, such as:

- Building more inclusive partnerships among all national partners such as the civil society and the private sector.
- Strengthening accountability among all development partners.
- More attention to be given to monitoring and reporting of development results to ensure that development efforts do have a positive impact on people’s lives.

As Egypt is starting a new phase in its history, the shape and dynamics of its relationship with the U.S. remains unclear. No one can deny that Egypt will have to depend on development aid in the coming period to rebuild its economy. However, without addressing the above issues, and having a clear strategy for ensuring aid effectiveness, the foreign aid will remain serving the wrong purposes and be another tool of repression and foreign interference in the country’s internal affairs.

This article is part of a writing assignment for Voices of Our Future a program of World Pulse that provides rigorous new media and citizen journalism training for grassroots women leaders. World Pulse lifts and unites the voices of women from some of the most unheard regions of the world.

Comments

Stella Paul's picture

Informative

Thanks Mirette for this informative article. It reminded me of a similar situation in Pakistan in recent times when serious questions were raised on the effectiveness of massive US aid and who it benefited. Congrats on completing module 4!

Stella Paul
Twitter: @stellasglobe

mirette's picture

Thanks a lot Stella for your

Thanks a lot Stella for your continuous motivation and support!!

Leslie Stoupas's picture

Important call to action!

This article is a great reminder about the effect of socio-cultural autonomy and the effects it can have on a country's citizens. It will be interesting to see what values emerge in Egypt as the country redefines itself. Thanks for sharing this!

Leslie Stoupas

mirette's picture

Thanks a lot Leslie for all

Thanks a lot Leslie for all your support in writing this piece!!

bennettml's picture

Nicely Done

Congratulations on handling a complex topic so well. Your organization of the subject matter and your progression through the topic was easy to understand and gave us so much information. US aid to any country is a very complex matter however one that comes with a great deal of responsibility on both sides. It is always distressing when we see that the dollars do not do as much as was intended.

MLB

mirette's picture

Thanks a lot Mary!

Thanks a lot Mary!

Dear Mirette,

Thank you so much for your valued work. I admire and appreciate the hard work you have done of organizing the information and research to educate us on this important topic; how you explore problematic, complex nature of the issue and resist offering a one-sided and simple answer, where there is none; and how your piece is driven toward developing a solution. I understand it's difficult, too, to offer your "personal experience" of an issue as abstract as foreign aid, but I would love to hear more about how this question impacts you, what it means to you as a woman and Egyptian journalist. It would also be great to hear your thoughts on how we can accomplish the tasks set out in your conclusion, i.e., build more inclusive partnerships and strengthen accountability!

Keep up the great work and thank you for teaching me so much in one article!

Sincerely,
Farnoosh

Farnoosh Fathi

mirette's picture

Thanks a lot Farnoosh for

Thanks a lot Farnoosh for reading this piece. To answer some of your questions: First, I work with an International NGO in Egypt "Save the Children", so I can directly see how foreign aid affects the Socioeconomic and political development of a country like Egypt. I think the challenge is always how these organizations are structured and how they create partnerships with other local NGOs. The problem with many international organizations through which the aid is channeled is their Eurocentric approach when operating in a country like Egypt. Many of these organizations view other local partners as "recipients" of aid and not like actual partners that play a role in the decision making process. This is often due to the lack of skills and capacities of the local partners as well. There is no clear cut solution to this, but As a first step I would say that if we have stronger, more educated local cadres in the civil society sector and the government, who are able to be a strong local partners to the International funders, that might be a solution to this challenge.
Mirette

Lehner's picture

Dear Mirette, Thanks for the

Dear Mirette,

Thanks for the well researched and thoughtful article. I love being enlightened by a non-US angle to foreign affairs and I am extremely grateful for the effort and time you took to share with us this interesting and compelling Egyptian point of view to US foreign aid.

Keep reporting because you have a lot to share with the international community.

Best,

Monica Lehner

mirette's picture

Thanks a lot Monica for

Thanks a lot Monica for reading this piece and for your encouragement!

MaDube's picture

Hi Mirette

Indeed the question of US aid to any African country, worse still North Africa is always questionable. Frankly I think US interference would be much lesser had they been part of the Berlin Conference but because they were left out in that process because they were fighting their own internal wars now they want to have a grip on the world that Europe derives from being former colonial masters. Quite sickening the whole deal but I like your fact based approach and your conclusion to say that without assessing aid effectiveness in improving the day to day lives of Egyptians then money will keep flowing into Egypt and the only beneficiaries will be the protestors who will get bashed with US made carnage in Tahrir Square.

Breese's picture

Great article

Thanks for this informative, in-depth analysis of American aid in Egypt. I feel I learned a lot about where it's coming from, the goals of the development efforts, and the challenges and success at achieving those goals. I was particularly interested in your ideas for solutions and progress moving forward. Thank you!

mrbeckbeck's picture

Looking forward

Mirette,
I appreciate how you dove deep into the question of aid effectiveness... it's always disheartening when so much money is spent for so little return to the lives of everyday citizens. I applaud your forward-looking conclusions, asking for a more rigorous focus on monitoring and analysis of the outcomes. I'm curious about the future of USAID in Egypt, and now I have some specific things to watch out for.

Congratulations, and good work!
Scott

Scott Beck
World Pulse Online Community Manager

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