Tough choices for Egypt

By STEPHEN ULPH CAIRO

A billion dollars a year is a lot of money. Not surprisingly, few aspects of the relationship between Washington and the Middle East provoke as much controversy as the $24 billion in economic aid that the United States Agency for International Development (USAID) has provided to Cairo over the past quarter-century. To date, American aid to Egypt has remained remarkably robust, surviving the US budget deficits of the mid-1980s, the end of the Cold War and the growing disgruntlement of the American public.
In terms of American aid, the Middle East trails far behind Latin America. Since the inception of USAID in 1975 with the Camp David accords, however, Egypt is the country in the region (Israel and Turkey excepted) that receives the most money from Washington. Alongside Morocco, Egypt received 95 percent of net flows to the Arab region between 1990-98. Egypt, which receives $815 million annually, and Israel, which receives $1.2 billion, make up America's largest overseas assistance program. The two countries were originally targeted with the aim of consolidating peaceful relations in the region.
But aside from Egypt's political support for the Gulf War - in exchange for which the United States wrote off $11 billion of debt - the United States hasn't gotten much bang for its buck. Despite Egypt's styling itself as the linchpin of Middle East peacemaking, the view in Washington is that the country has less influence than it once had and is unable - or perhaps unwilling - to significantly shift policy for issues other than those that Cairo deems important domestically.
The classic illustration of Cairo and Washington's divergent interests was the treatment of 62-year-old human rights activist Saad Eddin Ibrahim, whose dual Egyptian-American nationality wasn't enough to spare him a seven-year prison sentence last May. The high-profile human rights campaigner was charged with "defaming Egypt" in a report produced by his Ibn Khaldun Research Center on the deteriorating relations between the country's Muslims and Christian Copts, for "receiving foreign funds illegally" during his work monitoring parliamentary elections and for an article criticizing the Egyptian trend for dynastic succession, notably the apparent grooming of President Hosni Mubarak's son, Gamal, for power.
The incident unleashed a storm of complaint, particularly in view of the fact that Ibrahim's research center was precisely the sort of NGO targeted by the $30 million program to "strengthen civil society." Republican Senator Tom Lantos spearheaded a petition by 61 members of Congress protesting the unseemly rapidity of the legal process, while US media comment was openly caustic: "It's hard to guess," declared the Washington Post, "why Hosni Mubarak thought it was worth delivering this slap in the face to an ally that has backed his government and effectively kept him in power for the past 20 years. . . . Perhaps he felt it would have no effect on the appropriation of another easy $2 billion. The administration and Congress should prove otherwise."
The aggressive tone was matched in the Egyptian media by a defensive retort that "American aid does not give Washington a veto of Egyptian policy." For the average Egyptian, it was likely to have been the first time he had even heard that the United States was injecting $1 billion into the country every year. Inevitable questions as to where it was all going - for a population whose per capita income has steadily dropped to $1,390 - has left the government under increasing attack from opposition parties, such as the Wafd and the Muslim Brotherhood, which remain suspicious of whatever social or political strings may have come attached to the aid.
Camp David. In the view of many Egyptians, the US aid following Camp David has similarly not paid off as they were led to expect as compensation for their subsequent political isolation in the Arab world. The country has been wrestling for years with a liquidity crisis that is blamed partly on unforeseeable reverses - such as the East Asian economic crash and the Luxor massacre - but also on exaggerated government contracting on major infrastructure projects.
Many of these projects have ground to a bureaucratic halt, or have been wasted on housing schemes in the desert where nobody wants to live. Even success stories, like the $140 million renovation of the Soviet-built High Dam, have not raised the public mood because of a lack of publicity. USAID has actually proved unpopular in sectors such as agriculture - where there was a trend during the 1980s for liberalization through the Cash Transfer and Sector Policy Reform programs - and has created suspicion for its dismantling of traditional structures.
Meanwhile, reform of the centrally planned economy has never really got off the ground. A third of the workforce still holds government jobs that pay too little to live on, and unemployment, especially among college graduates, has been rising unchecked, swelling the ranks of the "educated poor." The only positive sign - a slight lowering this year of the $9 billion trade deficit - is actually due not to Egypt producing more, but to Egyptians simply buying less.
Unlike in Israel, the application of USAID in Egypt is conditional on its eventual use, but the task of assessing "value for money" nevertheless remains difficult. There are no reports yet available in which USAID or the Egyptian government seeks to present strategic assessments of how the program has performed in one sector or another. "We act more in the manner of a contractor," according to one USAID director, "executing one project and then moving on to the next."
The broader political justification has tended to dominate the debate. The aid was always rationalized in terms of security-oriented political goals to deepen Egypt's commitment to cooperate with the United States in regional affairs. This aim soon evolved into one of maintaining the stability of Egypt itself - hence the current justification that "a stable Egypt continues to be vital to the advancement of US goals in the region." For American donors, the only way to judge the payoff for USAID would be in terms of the results for Middle East peace, and the role Egypt is playing to secure it.
Diplomacy. In this regard, Egypt's behavior has presented the United States with a conundrum. Egypt has both the power and the economic need to play the role of moderator in the Israeli-Palestinian dispute. Yet the support given to the Palestinian intifada - notably Egypt's pledge of $30 million during the October 2000 Arab League summit in Cairo, followed a month later by the recalling of the Egyptian ambassador from Tel Aviv, and the subsequent official pressure to squash Egyptian calls for normalization with Israel - have hurt Cairo's role in this regard and decreased its value to Washington.
Even more curious is the free rein given to the airing of anti-Israel comments in the government-controlled media, prompting the following question by US Senator Mitch McConnell. "If Mubarak must pander to anti-Semitic groups for domestic political purposes, how can we expect Egypt to take the bold steps necessary to support peace? . . . Egypt's response to Palestinian terrorism and recklessness has been far less meaningful than we should expect of an Arab ally."
Mubarak's behavior is an example of what the Arab analyst Fawaz Gerges, writing in Al-Hayat last summer, calls Arab leaders who "lack any sort of strategic vision that goes beyond their basic objective of staying in power." Instead of confronting their inherent weaknesses, "they adopt convoluted maneuvers," writes Gerges, "using inflammatory nationalist rhetoric in an attempt to placate their constituencies, while doing the exact opposite in their dealings with the United States."
Edward Walker, the former assistant secretary of state for Near Eastern affairs during Clinton's presidency, notes that the split personality of the region's leaders, "who bash [the United States] in public because that's what they think their people want to hear and then say why aren't you more active and engaged," has its costs.
It's a vicious circle. The failure to develop constitutional legitimacy and the institutions of civil society means that there is an undue reliance on powerful foreign backers for regional leaders' survival. Western and US politicians, however, well aware that Arab decisionmakers are not serious, increasingly take decisions without reference to the fragility of their political and social infrastructures. And the more a regime bows to the demands of the United States that come with the promise of aid, the more its legitimacy is shaken in the eyes of the people - and the deeper its domestic crisis becomes.
Social unrest. Mubarak has done little to break this cycle. Efforts over the years to buy support from a dwindling pool - and maintain controls over social unrest - have meant ever more concessions to the conservative elements in Egyptian society. But the success of these elements in seizing the moral high ground has led to the Mubarak government's having to keep up with the tide of the developing "communal authoritarianism," where, in terms of Islamic probity, it pays to be seen as "more royal than the king."
Sharply increasing poverty, years of poor education and an absence of public debate have produced a climate where critical liberal thinking cannot possibly bear any dividends, and where the fate of the likes of Saad Eddin Ibrahim will unlikely be met with anything other than apathy.
Similarly, in a climate where the Al-Azhar University's Islamic Research Center is suspected of extending its privilege of imprimatur over works that do not concern religion, where intellectuals are suspected of atheism - and in the cases of Nasr Abu Zayd and Nawal al-Sadawi - threatened with forcible divorce proceedings on grounds of apostasy - and where students are exercised in calling for the active suppression of literary freedoms, you have a country which is now less liberal and progressive than it was a century ago.
If something of the consequences of Mubarak's Egypt, much to the annoyance of Washington and the great embarrassment of Cairo, has fed into the radicalization of Islamic politics - as the identity of a number of leading figures in Al-Qaeda demonstrated - the dramatic events of last September also focused American minds on Egypt's current economic dilemma.
Over the last year, the introduction of a crawling peg system for the exchange rate saw the Egyptian pound reset itself downwards three times with reference to the dollar from January's 3.85 to August's 4.15, correcting a fictional exchange rate that throughout the 1990s had remained 20 percent above its true level. But economic analysts saw this as but one symptom - alongside falling stock market levels, depleting foreign exchange reserve, an inability to pay off significant debts and capital outlay on large-scale projects - of a fast-failing economy.
But September 11th suddenly took away half of Egypt's tourism income - the country's largest source of revenue ($4.3 billion in 2000, or 10 percent of GDP) - and the air and maritime transport sectors also took a hit. Foreign investment levels also dived as investors were dubious of the potential stability of a country with a significant number of terrorist suspects in its midst.
Early fears of US foreign aid cuts to compensate for emergency budgetary allocations at home were, however, soon tempered by noises of support from Washington. In recognition of Egypt's political and economic exposure, and in recompense for its support for the American bombing campaign in Afghanistan, Secretary of State Colin Powell's November keynote speech on a "comprehensive peace in the Middle East" coincided with a pledge by the US ambassador to Egypt, David Welch, to provide an extra $100 million through USAID programs to support the country's 2001 budget.
Going under. This followed State Department spokesman Richard Boucher's earlier announcement on the "possibility of initiating discussions on the elements of a potential US-Egypt Free Trade Agreement." Though mooted since 1994, the slow pace of privatization in Egypt, along with related legal protections, had constantly obstructed its progress while a recent bid foundered over Cairo's refusal to reinstate its ambassador to Israel.
Although billed as fostering the smooth transition from aid to trade - the former has been decreasing at a rate of five percent over the last two years - the modest level of Egyptian exports to the United States means that the agreement is more important politically than economically: a symbol of confidence that, alongside success in brokering a peace agreement in the Middle East, could go a long way to reviving Egypt's image as a moderate nation worthy of international investment.
September 11th also takes the heat off Mubarak in a less auspicious way. The new spotlight cast on Egypt's pivotal importance in the Middle East conflict - even if this amounts to no more than maintaining a "cold peace" with Israel - and the payoff from the Afghan conflict, means that the prosecution of political activists is less likely to be so keenly monitored back in Washington. Already, the procedurally flawed trials of 21 Muslim Brethren in early November on charges of "inciting public opinion" and "belonging to an illegal organization" have passed without significant challenge, as has the arrest of over 250 militant suspects since September 11th.
So far, Washington's official reaction to the Saad Eddin Ibrahim case has been coy. And that has alarmed Cairo-watchers at home and abroad. Egypt's history shows that the country's economic well-being and respect for human rights are directly related. But in a profoundly negative way.