U.S. Aid to Egypt: The Current Situation and Future Prospects

U.S. Aid to Egypt: The Current Situation and Futur
Article
Summary
The current structure of U.S. aid to Egypt neither generates goodwill toward the United States nor alleviates poverty. U.S. economic aid would be much more effective if it encouraged microfinancing or invested in programs to clear Egypt’s northern coast of mines and distribute the land to poor farmers.
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A question is always raised in conversations with USAID officials: Why don’t Egyptians notice the role of American aid to their country? The simple answer is that U.S. economic aid to Egypt, which amounted to $455 million in 2007, translated to only $6 per capita,[1] compared to $40.8 per capita in Jordan for the same year. Yet Jordan’s per capita income, $2,850 in 2007, is 170 percent that of Egypt.

With U.S. economic aid to Egypt cut to $200 million for 2009, the per capita share is 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 is 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 is barely a drop in the bucket.

Egypt’s most critical needs include targeting aid to help create permanent jobs to enable citizens to earn a living with dignity, as well as providing direct assistance to the most impoverished citizens in the fight against poverty.

The way in which the already limited aid is utilized further marginalizes its impact. The aid does not meet or even take into consideration Egyptians’ most pressing needs, focusing instead on programs valued for strict ideological reasons. Egypt’s most critical needs include targeting aid to help create permanent jobs to enable citizens to earn a living with dignity, as well as providing direct assistance to the most impoverished citizens in the fight against poverty. In addition to spreading poverty at an alarming rate, the so-called economic reforms recommended by the United States and the IMF have caused an unprecedented surge in unemployment and increased income inequality over the past three decades. According to official data, 2.4 million Egyptians are currently unemployed, but the real number could be more than 8 million, according to independent estimates. The unemployed are deprived of a dignified livelihood and become a burden on their families. This in turn increases family poverty, contributing to the disintegration of what historically has been a remarkably cohesive social unit.

In more than one interview with USAID representatives and consultants, I was asked about the types of projects that could make USAID more popular in Egypt. I suggested that Egypt’s northern coast be swept clear of mines and its land reclaimed at the relatively low cost of less than a billion dollars. This would add hundreds of thousands of acres of arable land that could be distributed among landless farmers and agricultural school graduates, enabling them to earn a living with dignity and reducing their dependence on their families; this would also reduce poverty rates in Egypt. I also suggested that an advisory body of experts be assembled from across the political spectrum to help the poor start small- and micro-enterprises, which would create jobs for them and others. This body would provide guidance to prospective entrepreneurs and guide them toward existing opportunities. These projects would depend primarily on locally available materials and aim to satisfy the communities’ need for various goods that can be produced locally and competitively. The body of experts would also assist entrepreneurs in obtaining affordable financing, help them meet quality standards that would allow their products to be marketed locally and internationally, and link them to large commercial chains in Egypt and abroad to ensure that their products have a permanent market.

The current focus on helping businessmen, particularly powerful ones, and on U.S.-chosen infrastructure projects that create few permanent job opportunities will keep USAID unpopular in Egypt, especially in light of the aid’s small size.

If USAID were to move in this direction, its influence could become much more profound. The current focus on helping businessmen, particularly powerful ones, and on U.S.-chosen infrastructure projects that create few permanent job opportunities will keep USAID unpopular in Egypt, especially in light of the aid’s small size. 

As for U.S. security and military aid to Egypt, which is about $1.3 billion annually, it does not aim to strengthen Egyptian military power against any external threat, as this would be contrary to the declared U.S. objective of ensuring Israeli security and maintaining Israeli military supremacy over its Arab neighbors, including Egypt. Instead, this aid is devoted mainly to strengthening the regime’s domestic security and its ability to confront popular movements. This hardly enhances USAID’s popularity among the Egyptian people or educated elites. The unflinching American support for Israel, and Washington’s failure to reach a comprehensive political settlement even on its own conditions of ensuring Israel’s security within the 1967 borders, make Egyptians and other neighboring Arabs skeptical of political settlements that lead nowhere. It also leads them to question the value of the limited U.S. aid tied to the peace treaty with Israel, which is used to improve America’s image in the media and cover up the U.S. bias toward Israel at the expense of Arab rights.

Finally, aid given to Egypt provides the United States with political, strategic, and sometimes economic benefits that far exceed the value of what Egypt has received. The conditions tied to U.S. aid ensure that much of the money returns to the United States, whether in the form of the imported American products, work contracts that go to American companies at less competitive prices than Egypt could have obtained had the bidding been open to international companies, or the salaries of USAID experts. Most important of all, this aid consolidated a gross imbalance in trade relations between Egypt and the U.S. During the 1983–2007 period, Egypt’s total accumulated trade deficit with the United States was $45.1 billion, according to the IMF Trade Statistics Trends Yearbook. This sum is far greater than the total size of American economic aid to Egypt to date. The Egyptian trade deficit with the United States is closely related to this assistance, making Egypt one of the few countries with which the United States has a trade surplus, counter to its overall trend of an $820.6 billion foreign trade deficit in 2008.

Ahmad El-Naggar is editor-in-chief of the Economic Strategy Trends Report published by the Al-Ahram Center for Political and Strategic Studies.
  


[1] Egypt’s population is estimated to be around 75 million (World Bank, 2007).
End of document

About the Middle East Program

The Carnegie Middle East Program combines in-depth local knowledge with incisive comparative analysis to examine economic, sociopolitical, and strategic interests in the Arab world. Through detailed country studies and the exploration of key crosscutting themes, the Carnegie Middle East Program, in coordination with the Carnegie Middle East Center in Beirut, provides analysis and recommendations in both English and Arabic that are deeply informed by knowledge and views from the region. The program has special expertise in political reform and Islamist participation in pluralistic politics.

 
Source http://carnegieendowment.org/2009/06/17/u.s.-aid-to-egypt-current-situation-and-future-prospects/2klq

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