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An Analysis of the Agricultural, Economic, Military and

Democratic Contributions of USAID in Egypt

Frida Alim

Student ID 900118015

February 15, 2012

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Introduction:

This paper seeks to highlight the shortcomings of USAID’s programs and policy

and how these factors contributed to the post-revolution political and economic

environment in Egypt. The paper will proceed by looking at the inception of USAID and

its decentralization economic policies, which will include a brief synopsis of its

agricultural policies in Egypt. Following will be a discussion USAID financial and

material aid to the military. Finally, the paper will address the goals, programs, and

results of the USAID Democracy and Governance program, instituted in 1992.

Ultimately, the paper aims to show that USAID’s vested interest in stability in Egypt and

the maintenance of its treaty with Israel has come at the expense of pursuing the creation

of a pluralistic political system while its aims of privitzation and decentralization have

largely furthered bureacracy and strengthened an elite core on the Egyptian political and

economic scene.

Background of USAID in Egypt:

Since 1975, The United States has provided an excess of $28 billion in economic

and development assistsance to Egypt. A vast majority of this aid has gone towards the

Egyptian military as a way of preserving and incentivizing cooperation in Egyptian-

Israeli relations following the 1975 Camp David Accords. Approximately $1.3 billion has

gone towards USAID programs for strengthening the agricultural sector.1 Other

assistance has included upkeep of the Suez Canal, physical infrastructure, agricultural

productivity, education and health. However, of the non-military aid, much has been

1 Sharp, Jeremy. “Egypt in Transition.” Congressional Research Service. July 17, 2011. Pg. 6

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divided between debt-relief, the Commodity Import Program (which subsidized the

importation of American products), and the payment of American contractors. Indeed,

some of this money never left the United States, either going directly into arms

production, or being used to decrease Egyptian debt to the United States. From the

inception of the Commodity Import Program, it has absorbed a quarter of American

assistance at $6.7 billion. By 2000, this program had helped finance the purchase of

American goods from over 1,800 American suppliers through 1,400 private companies in

Egypt.

USAID programs in the 1980s began to more vigorously pursue the goal of

market privatization, along with pressure from the World Bank and International

Monetary Fund. The original intent was to create “a globally competitive economy

benefiting Egyptians equitably.” The 1990s saw further efforts at privatization of public

companies. By 2001, 125 companies had been majority privatized, at a total sales proceed

of 15 billion pounds.

In the 1990s, and particularly after the fall of the Soviet Union, the United States

began to incorporate democracy into its international assistance programs. Of the $2

billion of annual aid to Egypt, however, only $2 million went to democracy efforts per

year. To date, a total of $410 million has been awarded to non-government organizations,

both foreign and Egyptian. Aid has also come in the form of training of judges,

prosecutors and court administartors in the field of civil law.2

2 “USAID Egypt History.” http://egypt.usaid.gov/en/aboutus/Pages/usaidegypthistory.aspx

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In the educational sector, almost 2,000 schools have been created since 1975,

most in rural areas. The educational component of USAID aims to increase attendance

and reduce drop-out rates among female students, among other goals.

Egyptian Agriculture:

USAID did a great deal in the 1970s to change food consumption and production

through US and Egyptian subsidies on certain products. Timothy Mitchell, in his analysis

of development of Egypt by international organizations, highlights the vision of Egypt

that underpinned development efforts in Egypt. USAIDs’s 1976 report on Egypt

emphasizes the generations of poverty that existed in the Nile valley. By many

international organizations, Egypt was painted as vast stretches of unused land with a

fertile and highly populated area concentrated along the Nile. International organizations

conveniently ignored hundreds of years of economic and political changes in Egyptian

agricultural, and instead emphasized the need for international intervention in Egyptian

agricultural affairs. It was under this banner that the USAID Mechanization Project

proceeded from 1979 to 1987, with the goal of changing what was perceived as

traditional agricultural practices with American mechanization. USAID signed a $38

million contract with Louis Berger International of East Orange, New Jersey to fulfill this

mission of modernization. While the goal was to increase production, the program only

furthered labor shortage by replacing field workers with technology. In the meantime,

studies came to show that mechanization, as opposition to traditional farming techniques,

did not necessary show higher yields. The real problem in agriculture was instead the

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concentrated of land in the hands of a few farmers. Instead, the program contributed to

the wealth of farm owners, while displacing jobs in the agricultural field.3

While Egyptian diets were traditionall legumes and maize-based, subsidies

shifted the domestic production focus to increase the production of cereals. USAID was a

driving force behind this change with the assertion that an increase in meat consumption

necessitated more domestic meat production. This rise in meat consumption, however,

was due to an analysis of the average caloric intake across Egypt. This rise in intake

could actually be attributed to the growth of wealth among the upper class, in addition to

a growing number of tourist and resident foreigners—groups which formed the chief

consumers of meat and other animal products. Until this point, the agricultural rate grew

at a pace that exceeded the population growth. Expansion of the meat industry, however,

necessitated extra importation of cereals needed to feed livestock.

During the period bewteen 1966 and 1988, domestic production of grains was

augmented by 77%, while consumption of those grains increased by 148% due

overwhelmingly to an increase in meat production. USAID then financed the purchase of

$3 billion worth of grain imports from the United States to Egypt, with a reduced interest

rate, making Egypt the world’s largest importer of subsidized grains. While Egypt had a

surplus revenue of $300 million in 1970 in the agricultural sector, it had plunged into a

total external debt of $51 billion by 1989.

While the World Bank argued that these large changes in Egypt’s agriculture

indicate that “effective demand has been modified by a change in income distribution,”

Mitchell argues that these changes were created by more influential, wealthier portions of

3 Mitchell, Timothy. “Rule of Experts: Egypt, Techno-Politics, Modernity.” November 2002.

University of California, Press. Pg. 225

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the population amongst whose consumption of food monetarily had proportiontely

grown. Between 1970 and 1980, importation of grain and pulses increased by eight

times.4

Egypt then had to take loans simply to make timely payments of earlier loans.

The American government intervened, however, using the Egyptian support of the 1990-

1991 war against Iraq to wipe out Egypt’s $7 billion military debt and relax the $28

billion of long-term bilateral debt, which was eventually partially slashed and

rescheduled. One condition of these economic leniencies was an increase in the

production of export crops. To do this, sources and land would have to be diverted from

the production of staple foods. To sustain the Egyptian people, the importation of staples

to Egyptian consumers was subsidized, while production of those staples domestically

was taxed.

Ultimately, $13 billion of Egypt’s debt was written off. And at present, Egypt

holds the largest single markets for American wheat and corn, in addition to significant

importations of agriculture-related commodities.

Financial Aid the Egyptian Economy:

Changes made by USAID to the Egyptian economy through agriculture were

followed by economic reform agreements, pushed for by USAID, the World Bank and

the International Monetary Fund in 1991. The organizations pushed for structural

adjustment program, emphasizing privatization of the markets in Egypt. The need for

economic reform was prefaced by a brief economic boom in the 1980s, due in large part

4 Mitchell, Timothy. “Rule of Experts: Egypt, Techno-Politics, Modernity.” November 2002.

University of California, Press. Pg. 227

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to “windfall profits” from the oil boom years. The over-dependence of the Egyptian

economy upon the international demand for oil crippled the economy when the oil-boom

ended in the mid-80s. By surviving on a balance of payments, Egypt was able to maintain

a GDP growth of 6-7 percent from 1983 to 1985. By 1990, however, Egypt’s debt

reached $49 billion.

A further break-down of financial aid to Egypt shows that it can be retraced to

the Untied States. Almost all of the $15 billion awarded to Egypt from the beginning of

USAID’s activities in Egypt in 1974 to 1989 can be retraced to American corporations.

Approximtaely $7.7 was funneled to the Public Law sector, Food Aid Program and the

Commodity Import Program, allowing for grain, agricultural commodities and equipment

among other U.S. imports. Another $1 billion was paid as cash-credit, therefore

remaining in the U.S. to pay part of Egypt’s miltiary debt. And by the year 1983, the U.S.

had developed a well-established network of subsidies and effectively its own monopoly

in certain agricultural sectors in Egypt.

When Egypt began to fall behind in military debt repayments around 1983, the

U.S. should have ceased all aid except food aid, as dictated by law. This, however, would

have posed a threat to American subsidies and the income from Egypt, and the

government instead converted military loans to grants, and then forwarded those grants as

progress payments to itself to repay “earlier Egyptian arms purchases.”5 Additionally,

USAID set aside about $100 million from Egypt’s economic development funds to be

used as more Cash Transfers as interest payment on Egypt’s military debt. This practice

was technically illegal, as discovered by Congress, but at the time such movement of

5 Mitchell, Timothy. “Rule of Experts: Egypt, Techno-Politics, Modernity.” November 2002.

University of California, Press. Pg. 225

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money was untraceable. It was not until 1987 that the practice was again questioned, but

the government argued that such action was legal in that military debts became an

economic question once debt was established (rather than military), and that the same

practice was undertaken to control Israel’s annual military dues by diverting money from

its economic assistance funds.6 The practice was halted for a year, but after the Iraqi

invasion of Kuwait, Egypt slipped further into debt, and this debt, this time a total of $7.1

billion, was again written off with congressional support. By this point, $8.7 billion,

approximately 58% of all US economic assistance, had found its way back to the United

States for the purchase of goods.

Much of USAID’s monetary and reform policies have centered around the

privatization of the Egyptian economy. In relation to Israel, Egypt receives a minor

proportion of its aid as free money.

Since 1992, the United States has used the USAID Cash Transfer Program as an

incentive for domestic economic reform. In addition to the roughly $1.8 billion awarded

in this program, Egypt has received $70 million annuallly to support implementation of

program related activities. Of the monetary grants awarded to Egypt, up to 75 percent can

be spent on the purchase of US commodities, while up to 25 percent can be used to repay

Egypt’s debt to the United States.

As a gesture in support of economic reform, USAID provided $10 million to start

up the Egyptian Center for Economic Studies (ECES), which gathered industry leaders,

with the president’s son, Gamal Mubarak, as its helm. Five members of this group,

including Gamal Mubarak, now sit in jail with charges of squandering funds during the

6 Mitchell, Timothy. “Rule of Experts: Egypt, Techno-Politics, Modernity.” November 2002.

University of California, Press. Pg. 227

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process of privatization of public resources, land and government-run companies. In fact,

Gamal Mubarak and his lawyer, Taher Helmy, become domestic proponents of the

international economic effort of structural reform and privatization, the Washington

Consensus, in 1991. Using ECES as a mouthpiece, Helmy and Mubarak published

several policy papers on which many of the new privatization laws were based. The

center now estimates that, due to corruption, privatization deals have yielded only $10

billion of a possible $90 billion total since 1991. While USAID has never publicly

complained of the operation of ECES, Wikileaks revealed cables in which American

officials indicated that such privatization measures can yield corruption. One unidentified

diplomat stated, “The privatization and economic opening of recent years have created

new opportunities for ‘vertical corruption’ at upper levels of government affecting state

resources.”7

In 2003, privatization of nine companies yielded $18 million, and an additional

59 companies yielded $2.9 billion by 2006. Domestic production grew by 7 percent, but

certain members of the government stood to benefit more than the general population.

For example, Ahmed Ezz, a founding member of ECES, a member of the NDP and a

prominant parliament member, built the state-owned Alexandria National Iron and Steel,

which become the largest steel producer in the Middle East. When the company began

facing bankruptcy in 1998, Ezz began buying shares, eventually aquiring more than half

of the state run companies. Prosecutors now allege that he made an excess of $1 billion in

inappropriate profits. Additionally, certain laws written by the ECES and eventually

drafted, seemed to favor Ezz. One such law cut the corporation tax rate to 20 percent,

7 Grimaldi, James. “In Egypt, Corruption Cases Had an American Root.” Washington Post.

October 20, 2011.

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only further expanding Ezz’s steel empire. Another competition law was introduced that

seemed to defend Ezz’s business from accusations of monopolizing the market. The

allocation of aid to ECES is an example in which American attempts at supporting

privatization in Egypt served to strengthen governmental bureaucracy.

Military Aid:

Recent constitutional amendments in 2011 highlight a longstanding problem in

the Egyptian political landscape; the lack of governmental transparency. In the

constitutional amendments, SCAF reasserts the complete autonomy of the military

institution, and bars parliamentary oversight of the military’s budget.8 Instead, the

military budget is to appear as a single number in the state’s budget. There are, however,

cases in which the public can peak into the vast economic power contained by the

military. One such case is the economic-military agreement between the US and Egypt,

which is annually published by Congress. Egypt receives approximately $1.33 billion in

Foreign Military Financing (FMF) per year and, accordingly, the Obama Administration

recently requested $1.3 billion for the 2012 fiscal year. The primary reason for this aid is

to uphold the March 1979 Egyptian-Israeli peace treaty and to help maintain Egypt as a

“moderating influence” in the region. The funds are only to be used if the Secretary of

State certifies that Egypt is meeting its obligations under the treaty. Military Aid to Egypt

provides an insightful entry-point into the financial assets of the Egyptian military, which

domestically SCAF tries to keep from the public eye. Even so, military aid receives

8 Sharp, Jeremy. “Egypt in Transition.” Congressional Research Service. July 17, 2011. Pg. 6

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comparatively little attention in the literature of USAID and the World Bank, relative to

the extent of money involved in the military relationship.

Military aid is divided into three main areas; acquisitons, equipment upgrades,

and support/maintenance contracts. Of the $1.3 billion, approximately 30% goes towards

the purchase of new weapons systems from the United States as part of a defense

modernization plan. However, Egyptian military officials complain that FMF has not

risen to match the rising cost of weaponry, resulting in a decrease in net assistance.9

In a joint press conference between Secretary of Defense Robert Gates and former

Egyptian President Hosni Mubarak in 2009, he remarked that “multiple American

presidents and administrations have benefited from [Mubarak’s] wise counsel.” He also

noted that while the US administration supports human rights, the position towards

military funding is that the “foreign military financing that’s in the budget should be

without conditions.”10

The only notable condition is upkeep of the Camp David Accords

and keeping the Sinai Peninsula secure. In fact the economic-military relationship has

sustained a great deal of corruption, not only in abuse of funding, but also in the use of

weapons imported from USAID on protesters duing the 2011 revolution.

In 1986, the Egyptian Military settled a contract with General Motors to

manufacture passenger cars. USAID gave $200 million from its budget in subsidies to

General Motors. While the project was later abandoned for both political and economic

reasons, the army instead began assembling Jeep Cherokees from the Chrystler

corporation (241). By entering into such agreements, the United States was legitimating

domestic economic activity that strengthened the bureaucracy inherent in the military

9 Sharp, Jeremy. “Egypt in Transition.” Congressional Research Service. July 17, 2011. Pg. 12.

10 Rieff, David. “The Failure of US Aid in Egypt.” The New Republic. February 4, 2011.

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institution. The army would receive state subsidies, but money would go directly into its

own accounts rather than towards the state.

In the 1990s, the Pentagon announced that it would provide tens of millions of

dollars to help establish a 650-bed international medical center outside of Cairo,

specifically for treatment of Egyptian soldiers. While the Pentagon maintained that the

Egyptian military paid for its creation, the American military aid program contributed

$162.8 million for equipment, operations and maintenance. Once this hospital was built,

however, it was found that the hospital was being used for commercial purposes. The

hospital was treating civilian patients and offered a “lavishly furnished Royal Suite” for

international patients. Even so, the Pentagon continued its $46 million contract to the

Florida company TeKontrol to train hospital staff members for 12 months. When notified

of these abuses, the Pentagon commented that termination of the contract “could

potentially impact the desires of the Egyptian ministry of Defense,” to win international

accreditation for the hospital and therefore upheld the contract.11

Even so, only a small portion of military aid is handed over directly to the

Egyptian military. Instead, a large portion goes to directly to American companies chosen

to manufacture military weaponry. This aid is denoted as “Foreign Military Sales.” Under

this banner, the companies manufacture ships, tanks, planes, ammunition and guns for

Egypt.

In the 2011 Egyptian revolution, the extent of military aid from the United States

became apparent when it was discovered that the tear gas being used on protestors was

11

Rohde, David. “Egyptian Army’s Business Side Blurs Lines of U.S. Military Aid.” The New

York Times. March 4, 2011.

http://www.nytimes.com/2011/03/06/world/middleeast/06military.html?pagewanted=all

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manufactured from Combined Systems International of Jamestown, Pennsylvania. In fact

there seems to be no accountability for the use of American arms on peaceful protests.12

Instead, miltiary aid is contingent upon the peace treaty with Israel, tying the United

States to a very limited relationship with Egypt, that comes at the expense of domestic

human rights.

USAID Democracy and Governance:

Democracy efforts in Egypt began in the early 1990s, in the context of an

economic and social crisis. The fiscal crisis eventually resulted in intervention by the

International Monetory Fund and the World Bank. At the same time, Egypt faced the

intensification of activity and violence from extreme Islamist groups.

In 1998, USAID published its Conceptual Framework for Democracy and

Handbook of Democracy and Governance Indicators, which stipulated USAID’s aims in

general terms, but allows for insight into its goals. The document notes early on that

“countries that are experiencing economic growth and are actively engaged in trading

relationships are less likely to engage in acts of war,” highlighting a key pillar of

USAID’s brand of democracy promotion—one that is linked to economic reform and

economic incentivization.13

The framework outlines four target areas for democracy; rule

of law, elections and political processes, civil society, and governance. The Handbook

also quotes President Clinton’s National Security Strategy of Engagement and

12 Rieff, David. “The Failure of US Aid in Egypt.” The New Republic. February 4, 2011. 13 “Democracy and Governance: A Conceptual Framework.” Center for Democracy and

Governance. USAID. November 1998.

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Enlargement which emphasizes that countries wth “the strongest security concerns,” are

important targets for democratic and economic promotion.

As the United States began its work with democratization in Egypt, the Muslim

Brotherhood would have been a logical partner as it had been an established actor

operating in civil society. It was, however, illegal in the political context and any aid of

the Muslim Brotherhood would likely have been seen as a method of undermining the

regime. While its members were allowed to run as indepedent candidates in elections,

they were a clear threat to the Mubarak administration, and USAID effectively discluded

a strong political force from democratization.

Instead, USAID began to focus on supporting NGOs with the professed hope of

introducing civilian voices into the political system. In 1998, USAID established the

NGO Service Centre with the purpose to increase participation in public decision-making

in Egypt. It would provide technical assistance and small subgrants to NGOs operating in

Egypt. Projects under the service center could not begin until 2000, when Law 152 came

into effect in Egypt. In order to receive funding, NGOs would have to be registered with

the state. Law 152 “excluded from registration any NGOS with political or trade union-

like activities, which are exclusively restricted to political parties or unions.” Ultimately,

the Ministry of Social Affairs (MOSA) and the Central Accounting Office would oversee

grant allotment, and only those organizations registered with MOSA were eligible for

funding. If MOSA determined that the organization was wasting funds or overspending,

MOSA reserved the right to freeze the activities of the organization.14

14

Amer, Pakinam. US Funding of Local Civil Society Draws Criticism.” Egypt Independent.

February, 2010.

15

USAID also led the Media Development program that began in May of

2006, which was slated as a five-year program to improve “professionalism,

sustainability and economic performce of the Egyptian media sector.” The list of partners

with which the program would work, however, consisted largely of state media outlets,

including state-funded Al-Ahram and The Supreme Press Council. Notably absent from

the list of publications are Al-Masry Al-Youm (or Egypt Independent) and Al-Dostor;

both liberal publications that have come to be seen as reliable sources of information in

recent years. The program overview emphasizes the economic viability and performance

of local media. The overview also states a target as “improving the enabling environment

for a professional, objective and ecenomically viable media in Egypt by providing

technical assistance as requested by the Government of Egypt.” 15

Furthermore, the

activities of the MDP are overseen by a Steering Committee, with members from USAID

and the Egyptian Ministry of International Cooperation, assuring government control

over activities dealing with media.

In recent years, the Obama Administration had reduced funding of

American-based NGOs operating in Egypt, and increased funding of state-approved and

unregistered organizations, perhaps in an effort to ease tensions between the Mubarak

administration and USAID efforts. Ultimately, the 2009 Audit of USAID’s Democracy

and Governance Activities highlighted the Egyptian government’s “lack of cooperation”

as a reason for the failure of USAID’s democracy efforts to produce any positive change

15 “MDP Program Review.” Media Development Program Official Website. http://www.mdp-

egypt.com/about.php

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in the last two years, and ultimately for Egypt’s poor ratings in NGO indexes of media

freedom, corruption, and democracy. 16

Externally, aid from USAID has been refused by organizations based on a

will to remain independent of what may be perceived as foreign influence. For example,

the movement Kefaya, which has been an important force in recent uprisings and

protests, refused funding from US democracy-promotion efforts.17

The movement iself

was highly critical of American foreign policy in the Middle East and by refusing funding

was able to remain an authentic Egyptian movement. On the other hand, the liberal

Egyptian movement April 6th received funding from the American organization Freedom

House and was publicly criticized for taking such aid.

Current Challenges to USAID Democracy Programs:

The complacency that USAID has shown in cooperating with the Mubarak

administration’s closed political system is now revealing some serious disadvantages to

American relations with Egypt. While USAID had the opportunity to pressure the

previous administration into a more pluralistic political climate, the door was closed on

moderate political forces. Instead, the work done by the Muslim Brotherhood in society

during its years of exclusion from politics made it one of the strongest domestic forces in

time for the 2011 parliamentary elections, with few known opposition parties with the

same wide societal base. Similarly, the Salafist party Al-Nour, with millions in foreign

financing, has also had notable success in the recent parliamentary election.

16

USAID, Audit of USAID/Egypt’s Democracy and Governance Activities (Audit Report No. 6-

213-10-001-P), October 27, 2009. 17

Snider, Erin. “The Arab Spring: U.S. Democracy Promotion in Egypt.” Middle East Policy

Council. February 2012.

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Several factors, both internal and external, have dampened USAID’s

attempts at democratization. The first has been the extreme restrictions placed on

programs by the Mubarak administration, and the resulting complacency USAID has

shown. This is due in part to an unwillingness to put any contingenies upon military aid,

apart from upkeep of the Camp David Accords. Another issue that has arisen particularly

after American-led wars in Afghanistan and Iraq, has been a domestic skepticism towards

any American aid.

Internally, the organization has suffered from issues of oversight and has yet to

come up with an effective way to determine the success of its programs. In the 1990s, the

Bush administration and congress pushed legislation through Congress called the

Government Performance Results ACT (GPRA) which called for regular evaluations of

tax-payer funded programs. These evaluations were to provide results that were in

“objective, quanitifiable and measurable form.” The document identified different fields

in which measures of success should be indicated. For example, the report calls for the

“number of targeted issues which are receiving public attention.” Such stipulations seem

to indicate that success can be quanitfied, even in an area that largely targets behavioral

and societal changes in a way more suited for narrative18

reporting, as some NGOs have

argued. Such quantifiers are used in the USAID audit of Democracy and Governance in

2009, in which indicators are numeral. For example, “number of U.S. Government-

assisted courts with improved case management,” or “number of laws or amendments

promoting decentralization drafted with U.S. Government assistance.” Other indicators

included in the past record the amount of contacts developed or meetings held with

18 McMahon, Edward. “Assessing USAID’s Assistance for Democratic Development: Quantity

Versus Quality?” American Political Science Association. August 30, 2001.

18

officials in the host country. In some cases, however, even one meeting with a

cooperative official can yield results that make the program a success.

In other cases, such quantification is a helpful indicator of succcess or failure.

For example, one grantee was given $192,000 to ensure the distribution of 2,000

identification and voting cards in a village in the Qalioubiya Governate. Ultimately, only

330 cards (17 percent) were issued in time for the April 2007 election.19

Ultimately, USAID’s 2009 audit reports limited achievements in democracy and

governance programs. It reports on one of USAID’s larger projects, which provided

training for specialists worknig in mediation offices in the Ministry of Justice and the

training of family court judges. Results, however, indicate that there may be limited

communication between USAID and the Egyptian govenrment, as approximately half of

recipients of mediation training were “employed by other ministries and may not use the

training as intended,” while of the approximately 15 to 20 percent of trained family court

judges were moved to other courts. Other shortcomings were notable when USAID

grantees in Egypt failed to reach their goals.

Externally, USAID is now facing criticism and intervention from the Supreme

Council of the Allied Forces. In 2011, the United States approved $65 million for

democracy assistance in Egypt after the revolution. Approximetly 80 percent of the funds

would go to US contractors to assist Egyptian political parties and civil society. Such

gestures have been criticized by SCAF as “foreign interference” and argue that

democracy “is a matter of national sovereignty.”

19

“Audit of USAID/Egypt’s Democracy and Governance Activities.” USAID Office of Inspector

General. October 27, 2009.

19

Current State of Affairs:

Following the 2011 revolution, U.S. policy was concerned with the establishment

of stability in Egypt, communicating with new political forces, and the implementation of

a timeline that would allow for the mobilization of secular reformers and young

revolutionaries before the elections. The Obama Administration pledged approximately

$150 milllion in existing Economic Support Funds to be put towards economic recovery

and democracy promotion, in addition to $80 million for insurance purposes with

Egyptian financial institutions.20

The administration also promised $1 billion in U.S.-

backed loan guarantees, and $1 billion in bilateral debt relief. By August 2011,

approximately 85% of the funds used towards democracy efforts had gone into U.S.

organizations working in Egypt, including the National Democratic Institute (NDI) and

the International Republican Institute (IRI), which receives a combined $9 million

annually from USAID and the State Departments’s Bureau of Democracy, Human

Rights, and Labor.21

While the overall aid been criticized as a small amount in the

context of Egypt’s economic crisis, the US has also been working towards international

support for Egypt, and both the International Monetary Fund and World Bank have

pledged money to Egypt contingent upon ecenomic reform conditions.

In March of 2011, USAID began advertising available funds for non-

governmental groups in Egypt. As a result, hundreds of individuals lined up at USAID to

apply for grants. Over the course of the next few months, USAID allocated millions of

dollars to various organizations. While in the past USAID had agreed to the

20 Egypt in Transition. Congressional Research Service. July 17, 2011. Pg. 6 21

“IRI Refutes Continued Misrepresentations About Its Work in Egypt.” January 2, 2012.

International Republican Institute. http://www.iri.org/news-events-press-center/news/iri-refutes-

continued-misrepresentations-about-its-work-egypt

20

administration of funds to pre-approved organizations through MOSA and the Central

Auditing Office, USAID began to by-pass government approval. SCAF ruling generals

have similarly called such moves part of a “foreign agenda.”

In February 2012, 43 employees of international groups, including 16 Americans,

were referred to trial and placed under a travel ban. Among those under the travel ban are

members of NDI and IRI. NDI, which is now facing accusations of operating as an NGO

without a license, has in fact been operating in Egypt since 1995, when it supported

Egypt’s first elections oversight program.22

In 2010 it helped expose voting irregularities

and low voter turnout in the parliamentary election. In fact, both NDI and IRI applied for

registration in 2005, but never received official permits.23

On its website, IRI claims that

the Ministry of Foreign Affairs confirmed the completion of their application, yet never

received a permit. Nonetheless, their operation was tolerated until recently.

In August, USAID came to an agreement with Abdel Aziz Hegazi, president of

the General Federation of NGOs, in which responsibility for the distribution of funds

would be given to the Ministry of International Cooperation. Sherif Ghanim, president

of the Egyptian NGO Support Center has criticized the agreement as enabling corruption

and bribes, and blamed the government’s beaurocratic measures for aid complications.24

Yet on December 29 2011, seventeen NGO offices were stormed by Egyptian

authorities, many of their documents and computers confiscated. A fact-finding

committee was established and eventually leaked to Al-Shorouk newspaper. The greatest

22

“The National Democratic Institute: Egypt.” http://www.ndi.org/egypt 23

Morsy, Ahmed. “Egypt’s Paradox.” The Atlantic Council. January 4, 2012.

http://www.acus.org/egyptsource/egypts-paradox-foreign-funded-military-attacks-foreign-

funded-ngos 24 Al-Qadi, Yasmin. “USAID Caves Into Egyptian Goverment Demands Over Aid

Disbursement.” August 15, 2011.

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recipients of foreign funds were found to be Egyptian Salafi organizations, which had

recieved almost $50 million from Gulf donors.

Further adding to the controversy, International Cooperation Minister Fayza

Abouelnaga issued testimony against USAID in October, saying that the funding was a

way to contribute to unrest in Egypt and reflects a “determined will to abort any chance

for Egypt to rise as a modern and democratic state with a strong economy.”25

SCAF has also lashed out different groups, for example criticizing April 6th and

Kefaya for accepting funds from USAID, while those organizations have denied the

allegations. Despite recent high-level meetings between Egyptian and American officials,

the domestic rhetoric of SCAF seems bent upon cultivating a public image of foreign

infiltration—one that works through civil society organizations, both foreign and

Egyptian. This has been used as a pretext to scare aid works and impede the activity of

NGOs operating in Egypt. Reporters without Borders now ranks Egypt as 166th in its

2011 Pess Freedom Index, down by 39 places since the fall of the Mubarak

administration.26

This latest diplomatic crisis has resulted in threats from Congress and the

President to cut Egypt’s $1.5 billion annual aid package. The result of this crisis will be

particularly interesting given commentary by previous Chairman of the Joint Chiefs of

Staff, stating that military aid is “without conditions.”

25

“Minister’s Remarks on US Intent to Sow Chaos Stoke Tensions.” Egypt Independent.

February 2, 2012. http://www.egyptindependent.com/node/659331 26

Topol, Sara. “The Assault on Egypt’s Free Press.” New York Times. February 15, 2012.

22

Conclusion:

Since its inception in 1974, USAID has fostered a relationship with Egypt based

on economic dependence. The extensive changes instituted in the agricultural market

were contributing factors to the accumulation of Egyptian debt through a market analysis

that completely misunderstood or misinterpreted demand by Egyptian consumers and

instead resulted in billions of dollars in revenues to the American agricultural market.

Attempts at decentralization both politically and economically, have largely furthered

bureaucracy at both local and higher levels of governance. For the sake of upholding the

Egypt-Israeli treaty, the United States has overlooked abuse of funds and misuse of

weaponry in peaceful protests. Furthermore, political groups that have previously

operated without USAID, and that have indeed criticized USAID, are now prominent

political forces. It remains to be seen whether the incoming administration, after the

upcoming presidential elections, will be friendlier towards relations with the United

States, and the shape such relations will take.