Egypt, arguably, has been the most important U.S. all in the Arab world since it made peace with Israel in 1979. Not coincidentally, Egypt also has been, since that time, the second largest recipient (after Israel) of American economic and military assistance. Economic aid to Egypt and Israel comes through the U.S. Economic Support Fund (ESF), and military aid is officially known as Foreign Military Financing (FMF). Combined, ESF and FMF form the basis of the U.S. security assistance program. In 21 years, Egypt has received some $21 billion in economic aid from the United States plus over $25 billion in military aid. As American economic aid to all nations has been reduced, eliminated or "under review" in the past several years, U.S. aid to Egypt has not been immune from scrutiny although it has retained its second-place position. In 1990, Senator Robert Dole (R-KS) suggested aid to Egypt and Israel be reduced by a mere 5 percent1 to free-up and shift limited U.S. resources to help emerging democracies. Some considered his proposal a "bombshell,"2 but it fizzled as his recommendation was ignored by both houses of Congress.
Calls for the reform of foreign aid generally and USAID in particular have been heard for the past decade from Democrats and Republicans as well as leaders in the development community.3 Egyptian and American officials have adapted to such calls. For instance, in September 1994, when Vice President Al Gore was in Cairo for the U.N. Population Conference, he suggested U.S. Egyptian economic relations might be better served through a "partnership for growth" rather than an indefinite continuation of foreign assistance. The U.S. Egyptian Partnership for Economic Growth and Development was inaugurated in 1995 as a joint initiative to stimulate Egypt's private sector, attract foreign investment and reduce unemployment. It brings together American and Egyptian government officials and leaders in the private sector to develop "policies to promote expanded economic growth and job creation in Egypt and to build ties between the two countries for mutual benefit."4 This partnership is an example of U.S. policies aimed at moving away from government to government assistance programs towards private-sector development.
President Hosni Mubarak understands such a move, even if he resists the idea that his government would receive less aid. In 1995, he acknowledged: "We don't expect that aid will last forever. We know very well that there will come a time when it will be reduced, and we have no problem with that."5 Whether he has "no problem" with that is questionable, given his government's dependence on U.S. and other foreign aid. It is certainly unlikely that he welcomes the trend of shifting aid toward the private and non-governmental sectors rather than toward his government.
The U.S. aid program in Egypt is the largest such program in the world. It speaks volumes about key aid and development issues and must be analyzed closely as the United States considers how to reform its aid program globally. As the United States has slipped from its leadership position to "also-ran" status in the aid business6 (dropping to fourth place after Japan, France and Germany), the program in Egypt can be instrumental in showing ways to reform USAID and U.S. foreign aid generally. Some see this program as a "model" that other recipient nations should emulate; others see it as a "failure."7 While the truth may be somewhere in the middle, the reality is that Egypt is far from a "model" of effective use of foreign assistance. The country remains poor, overpopulated, polluted and undemocratic while the state remains the dominant force in economic affairs. In short, Egypt in 1996 continues to exhibit virtually al the characteristics the United States has claimed to want to change since it began its massive economic aid Program in 1975. This failure to better utilize billions of dollars in foreign assistance can be blamed on Egyptians and Americans alike. This article seeks to explain why.
USAID IN EGYPT
While Israel receives more U.S. aid than Egypt and all other recipients, its aid is in the form of a cash grant: $1.8 billion in military aid, $1.2 billion in economic aid. This compares with $1.3 billion and $815 million, respectively, for Egypt. As a recipient of cash grants, Israel requires no AID "mission" or the trappings of a large American presence-project managers, directors, staff, consultants and so on that are part and parcel of AID missions elsewhere around the globe. Project assistance such as that in Egypt does require them.
In the 1980s and early 1990s, the USAID mission in Egypt had over 200 employees in the administrative offices in Cairo. In that same period, the U.S. embassy in Cairo, the largest such diplomatic complex in the world, had numerous officers working on foreign assistance programs. Representatives from the U.S. departments of Agriculture, Commerce and Defense were among the most prominent. In addition, thousands of contractors, sub-contractors, project directors and support staff facilitated the spending of money on given projects: e.g., oral rehydration, immunization, water, wastewater, sewage, schistosomiasis research, university linkages, agricultural credit, local development, small and micro enterprises, commodity imports, privatization and so on.8 This staff, which can be seen as a dangerously large American "presence," is justified as necessary to monitor spending, to limit waste, mismanagement and corruption, and to provide technical and management training for bureaucrats and contractors.
With these significant financial and human resources being brought to bear on the myriad social, economic and political problems facing Egypt, the aid program has encouraged two decades of popular hope for, and official promise of, economic prosperity. Is has also led to a general disappointment in both popular and official circles, given the failure of this aid to have more of an impact. Egypt has benefited from American aid, to be sure-fewer children die from diarrheal disease; Egyptian children have one of the world’s highest immunization rates; sewers don’t 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.”9 But Egypt is not 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.
After the United States had spent some $21 billion in economic aid to Egypt between 1975 and 1996, why was it still necessary to establish a special US-Egyptian “partnership” for economic growth and development? If $21 billion has not already promoted growth and development, what else can? Will such a “partnership” do the job, or is its establishment merely prolonging U.S. complicity with a regime that refuses to allow a freer hand to the private, non-governmental and non-profit sectors, and society as a whole?
Why has Egypt not been able to take better advantage of the billions of dollars in economic aid it receives every year to promote its own growth and development? Why has it not been able to lessen its dependence on such aid? There are obviously many reasons, including the vagaries of the international market place, internal structural imbalances, misguided government policies and problems associated with foreign-aid programs.
In addition to these and other important factors, attention is directed in this article toward a problem that is common to virtually all political and economic systems: the political struggles inherent in the policy-making process. Bureaucracies and other political units compete for power to make or at least influence policy (thus asserting political relevance). This competition is found not only between bureaucracies but also within them and can cause numerous problems inside a political system. But when another government becomes involved, as in the case of a foreign donor, then the problems increase exponentially. Not only does the Government of Egypt (GOE) compete within and against itself, and with the United States; the United States also competes within and against itself, as its various bureaucracies have different goals for their government’s aid program in Egypt. USAID officials must deal with these turf battles and try to implement what they consider to be sound economic policies even as other forces seek to subvert, modify or simply ignore the “perceived wisdom” of AID officials, U.S. consultants and their Egyptian counterparts.
While it is important to understand the complex internal turf battles of two labyrinthine administrative system (the Egyptian and American bureaucracies), most observers simply want to know the answer to their bottom-line questions regarding American aid to Egypt. But there ever exists conflict over the bottom line. Some observers of the American aid program in Egypt want to know: Is Egypt developing? And does U.S. foreign assistance to the Government of Egypt promote social and economic development in Egypt? Others, uninterested in the social or economic welfare of the Egyptian people, care to know: Is Egypt stable? And are American interests in Egypt secure?
The fact that there are two very different sets of questions highlights another reason that U.S. aid has not succeeded more fully in Egypt. Strong competition exists over goals (which ones and how to achieve them), in both the U.S. and Egyptian political and bureaucratic systems.
GROWTH WITHOUT DEVELOPMENT
Egypt's economy is not well diversified and is a hybrid of state-capitalism, dependent private capitalism and “rentierism.” It is based primarily on state-owned enterprises (complicated by inconsistent attempts at privatization), a private sector that is often dependent on the state for subsidized utilities and marketing facilities, and the collection of "rents" from various sources: Suez Canal tolls, tourism, remittances (money sent home by Egyptians working abroad) and oil revenues. Other sources of income include exports of Egyptian long-staple cotton and, of course, foreign aid. The latter, over $4 billion annually in military and economic aid, is not generally in the form of hard currency but in credits (e.g., for commodities) and technical assistance (e.g., project aid). There is, therefore, a continuing dependence by Egypt on foreign donors for a significant portion of its gross domestic product ($57 billion in 1995).
In the 21 years since USAID came to Egypt, the economy has grown, to be sure. Gross domestic product (GDP) grew at an average of 8.4 percent from 1970 to 1982 compared with 4.3 percent for 1960-70.10 That rate slowed, however, to roughly 5 percent between 1984 and 1987. In the 1990s, GDP growth has hovered around 2.0 percent.11 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 1986. Even after the 1991 Paris Club debt relief, which lowered Egypt's foreign debt from $50 billion to $38 billion, Egypt has a debt-service ratio12 of 16-17 percent. Foreign debt was roughly 89 percent of GDP in 1993-94 and 81 percent in 1994-95.
The financial market has experienced a number of reforms since 1991, and the stock exchanges (Cairo and Alexandria) have revived. Exports have not expanded as hoped, some of which can be attributed to the real appreciation of the exchange rate.13 This appreciation is due to the ' slow decline in inflation (8-12 percent] between 1992 and 1995...coupled with the fixed nominal exchange rate against the dollar."14 Unemployment remains above 20 percent15 and underemployment is rampant. As subsidies on food, energy and services are lifted and as government salaries and other low wages remain stable, real wages drop.
The price of transport, electricity, food, housing and health care is rising dramatically. Low-income groups are particularly hard-hit. As government seeks to reduce its role in providing education and health care, these costs go up. In addition, as real wages decline and unemployment rises (especially for public sector employees), the demand on the social-services sector (health care, welfare, education) will rise. One economist at Cairo University estimates 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. She laments that economic reform is "being applied in a society in which half the people are living below the poverty line."16 Other economists argue that unemployment, inflation and poverty were rampant long before the economic reform program was instituted and that this program will eventually help alleviate many of the long-established negative aspects of government mismanagement.
What these "good news, bad news" statistics describe is an economic situation in which Egyptians experience "growth without development," especially in the rural economy. Richard Adams discusses this phenomenon in agriculture and attributes it to the government's determined policy of control of agriculture instead of management of it. While much of this control has diminished since 1987, the policy is maintained over industry, tourism, financial markets, oil production and so on. Control, for example, over agriculture is a technique used to maintain law and order and to extract a surplus, ostensibly for national development purposes. This is in fact a political technique designed to thwart opposition to the government as it caters to a potentially disruptive urban population, for example, by insuring low-cost food. This technique of subsidizing urban populations-in food, housing, transportation, energy, health care, education, job security to ensure political stability (even if at the expense of farmers) takes priority over economic development. (As will be demonstrated below, this priority is espoused by many of Egypt's foreign patrons as well.) The result is not so much a satisfied population as a minimally pacified one.
To manage, as opposed to control, is to seek to increase the flow of surplus (e.g., out of agriculture) by qualitatively changing the social and economic character of production. Economic growth has occurred in Egypt's agricultural sector (as well as in industry and the service sector). But “development, in the sense of qualitative changes in the units of economic production, has not taken place. As a consequence, rural poverty and inequality have been slowly increasing.”17
Most observers of its economy agree overwhelmingly that Egypt has tremendous potential that is not being met primarily due to government policies of control: price controls, ill-directed or insufficient subsidies (e.g., subsidizing the rich and middle class more than the poor), government quotas and procurement mandates placed on fellaheen (farmers) and other producers, improper management of marketing facilities and so on. Government rationality is not in question, but it is the type of rationality that matters. The government maintains these policies more for political priorities than for economic development goals.
In the late 1980s and early 1990s, some members of the Egyptian government came to realize that their policies of economic control amounted to strangulation. They also noted that political stability and regime maintenance came not just through a massive army, police and secret police apparatus but through widespread economic development as well. In 1987, Minister of Agriculture Yusef Wali began a modest but deliberate and sustained process of reforming the agriculture sector. He liberalized pricing policies. quotas and mandatory sales of certain products to the government. He also began to increase farmers' access to credit, an essential part of encouraging private-sector development.
In 1991, the government of Egypt launched a more extensive reform process, primarily through banking and the liberalization of interest rates, exchange rates and trade. While structural adjustment occurred, privatization and other liberalization policies did not follow. President Mubarak also maintained essentially the same cabinet and prime minister, a group noted for their lack of progress in economic development, from the mid-1980s until 1996. Only in January 1996 did he appoint a new prime minister, Kamal Ganzouri, who has begun to take some steps toward the privatization the government had long promised its international benefactors. Ganzouri. however, had long been derided by donor officials as a socialist. a throwback to the Nasser era. and an obstacle to economic reform, structural adjustment and privatization. In 1996, he appears to be a "born-again" reformer who has wowed the donor community with his supposed commitment to reform plans, long-discussed but never fully acted upon.18
AID FOR DEVELOPMENT?
The United States and other governments generally share the political priorities of the Egyptian government, policies that come at the expense of economic development. Since 1975, Egypt has received over $21 billion in economic assistance from the United States and a similar amount from other foreign donors. The purpose of this aid has remained essentially the same over the years: It has been both an incentive and a reward for Egypt's commitment to peace with Israel. But it is doubtful that such aid is necessary to keep Egypt on a “peace-footing;” the people of Egypt and their government are not about to wage war on Israel. This aid, therefore, is maintained at high levels for other reasons: Egypt has become a strategic asset to U.S. interests in the Middle East (oil, trade, regional security, counterterrorism and so on).
Still, Egypt has not demonstrated the ability to use this huge economic assistance to promote its own economic development to a significant degree. Nor have foreign donors, especially the United States, been able or willing to require Egypt to use these funds more effectively.19 Regime stability takes precedence over economic efficiency.
This can be seen in Egypt's use of U.S. aid to agriculture.20 Since the mid-1980s at least, officials within Egypt's Ministry of Agriculture (MOA) have been under _great pressure not only from USAID officials but also from bureaucrats in other ministries and politicians in their government. AID has pushed the MOA to allow a freer market system to determine cropping patterns, marketing and distribution of products, and overall prices, in order to send more appropriate signals to farmers and others as to which crops Egypt should be producing, selling domestically and even exporting. While many officials in the MOA found considerable agreement with the AID argument and accepted the need for reform of pricing, quotas, subsidies and marketing, they also found tremendous opposition from within the government, their own ministry, and other ministries, especially Irrigation, Industry, Supply and Planning.
It is no small task to have to confront these pressures from within the Egyptian bureaucracy and from American (principally AID) circles, especially in the face of continued uncertainty or lack of consensus within one's own ministry. There is so little agreement within Egypt on the appropriate economic and social path the country should be following – whether socialist, capitalist, “Islamic” or other21 – that many voices propel the policy debate within individual ministries and across the bureaucracy as a whole. They compete for President Mubarak's attention and promote their point of view. No consensus emerges, so no serious action is taken to mend an economic system that was in a state of crisis between 1984 and 1991. While things have stabilized since the financial reforms of 1991, economic policies are far from progressive. The continuing instability of Egypt's economy both sharpens the need for consensus on policy reform and subverts its attainment.
Competition between Egyptian ministries supersedes ideology and comes down to individual and organizational self-interest. As various studies suggest, Egyptian organizations exhibit characteristics similar to bureaucracies in much of the world, regardless of geographic location or political circumstance.22 As Crozier explains, power – in various forms and wielded by numerous actors within a bureaucratic organization – is the universal phenomenon inherent in any hierarchical system. Bureaucracies, says Ayubi concurring with established Marxist contentions, are essentially conservative,
Even if bureaucratic leaders desire change (and it is an important “if”), they are made so weak by the pattern of resistance of the different isolated strata within the bureaucracy, that they can use their power only in truly exceptional circumstances.23
Yet power is an inevitable part of the functioning of all bureaucracies, which maintain stability and a minimum of consensus through shared norms, especially the realization that each group's privileges depend to a large extent on the maintenance of other groups' privileges. Beyond this minimum, consensus breaks down as bureaucrats compete against each other to increase their power, especially in a government facing changes due to proposed administrative reform (Egypt), or limited budgets (the United States).
THE BUREAUCRATIC STATE
Egyptian society as a whole is highly bureaucratized, with government agencies encroaching on virtually all aspects of life and death. It has been this way since Pharaonic times, say Weber and Ayubi, who separately explain how Egypt, throughout its 7,000-xear history, has been an example of “relatively clearly developed and quantitatively large bureaucracies,”24 rendering it a “purely bureaucratic state.”25 Education, religion, politics, agriculture, industry, banking, tourism and much more are regulated and controlled by the state. Given the dominance of various bureaucracies in virtually all aspects of Egyptian economic, social and political life, any hope of changing any part of the system presumably requires working within (or possibly manipulating) it.
This is especially true of attempts to promote economic development whether made by the government, AID, the World Bank, General Motors or any other do nor or investor. Development efforts inevitably come into contact with several agencies, each of which has some say in how these efforts are to be undertaken. Of course, it is recognized that the government of Egypt often works outside its own system when it needs things done26 in a hurry (or at all), and AID officials express a desire to emulate the GOE in this respect.27 In fact, working outside the system really means working outside the normal channels of operation, utilizing relatively more efficient agencies or ones over which an official or organization has power (i.e., the ability of a “requesting agency” to obtain what the “implementing” agency would not otherwise get on its own28).
BUREAUCRACY AND DEVELOPMENT
Bureaucrats can promote or inhibit economic development, depending on the role they choose to play. For instance,
A bureaucracy may contribute to economic development in two major ways: (1) the provision of services and other aspects of the infrastructure needed for economic growth; and (2) direct participation in the economic field as an "entrepreneur" either out of ideological choice or as a result of other practical considerations.29
In other words, an efficient, activist bureaucracy may provide necessary services and leadership to promote development (e.g., the Suez Canal Authority, MOA). However, administrative bottlenecks are "among the main causes behind the fact that economic plans too often fall short of expectations....Administrative deficiencies could be as crippling to economic growth as lack of capital.”30 In addition, bureaucrats who compete against each other for their own personal interests and advancement may also do much to inhibit governmental or ministerial plans.
Because traditional bureaucracies entrusted with the responsibilities of formulating, planning, executing and monitoring Egypt s development have, to a large extent, failed,31 other organizations, most notably the Egyptian army and Islamic groups, have recently taken an entrepreneurial role. The army is building roads, developing cities (including providing basic infrastructure to support them), growing crops to feed its own troops an even marketing and distributing the surplus to the public for a profit. Islamic groups have developed efficient social services,32 most notably schools and hospitals, out of frustration over the government's inability to target these communities with development projects in response to their needs.
THE GOVERNMENT AND DEVELOPMENT
It is impossible to speak of the Egyptian government's view of and approaching to development, just as it is impossible to speak of the U.S. government's view or approach. Rather, there are numerous views and approaches of the various ministries and governmental bodies and their political heads. Personalities remain important in Egypt, both in pushing for reform and in leading efforts to resist economic initiative or to upset other ministers' attempts at economic reform.
In an effort to suggest that there is consensus on economic (and political?) reform, the government appears to speak with one voice and in fact to use only one word, "gradualism." Officials from various ministries-Planning and International Cooperation, Agriculture, Tourism, Economics, Finance, Foreign Affairs, Industry and Irrigation-all say Egypt agrees with donors on the need for economic reform and privatization as prerequisites to development but will undertake such reform only on its timetable, taking into consideration its political and social environment, which they say USAID, the IMF, the World Bank and other donors ignore. Yet within this unity there is a diversity of opinion that often descends to open inter-ministerial rivalry on what economic reform entails and how it will be achieved.33
The MOA, especially under the leadership of Yusef Wali, has remained a major force in promoting economic development. The focus, obviously, is to increase agricultural productivity, but the hope is to use growth here to promote development throughout the economy. Following the success of Wali's agricultural reform program of 1987 and the stabilization of financial markets after 1991, tourism has become a new arena for reform. If there has been any progress in the efforts at privatization, It has been in the sale of hotels to private-sector interests (e.g., Egyptian-Saudi companies).
Even as progress is made in pockets of Egypt's largely state-owned economy, little change is found elsewhere. Ministries are intertwined; if foreign aid is to be used effectively for one sector, various other sectors (and therefore ministries) are affected. And if one or more of these ministries wants to thwart (or even just not support) a development project, the project has little chance of success.
Organizational and personal rivalries, based on related interests, are also evident and endemic between bureaucracies, not just within them. And even if a particular minister decides on certain initiatives to change, reform or otherwise improve the organization or its economic or social concerns, rival ministers may have something to say about any proposed changes. Even if the changes cover areas which otherwise appear to be wholly within one ministry's range of responsibilities (e.g., crop prices), other ministries can find a reason to assert themselves and disrupt any plans for change. For instance, one would assume (as most AID officials new to Egypt did) that since the government was controlling cropping patterns, prices, marketing, etc., such control would be the responsibility of the Ministry of Agriculture. However, this is not the case. An examination of the turf battles over cotton and wheat highlights some of the difficulties confronting development officials in Egypt as well as the United States.
Cotton is a major input to the clothing industry in Egypt, and the Ministry of Industry does not want any increase in its price, nor does it want the MOA to make decisions on the quantities of its production. (Through AID's Agricultural Production and Credit project, mandatory planting and delivery requirements were eliminated by 1994.)34 As cotton is a principal export, various other ministries have a stake in its production and price, including the ministries of Economy, Finance, Supply and Foreign Trade. In fact, this is the only crop that AID officials formerly admitted Egypt should be controlling, since it has a near monopoly on long-staple cotton trade in the world market. Yet, AID officials thought the control should be in the opposite direction, i.e., that the government should raise the procurement price above the world market price, instead of keeping it at half that price. A price increase would give an incentive to farmers to produce more. Prices are kept low so that state companies run by the Ministry of Industry can make clothes inexpensively while turning a profit. The government as a whole also profits, as its Ministry of Trade buys the crop at half its real price and sells it abroad at its market value. In October 1995, the government imposed a ban on cotton exports "to protect the public-sector textile mills from a shortfall in supply and rising domestic cotton prices."35 It lifted the ban in February 1996 despite opposition from the state-dominated text1fe sector. As cotton remains an economic football for competing ministries, the Egyptian cotton farmer loses, especially if the MOA can do little to help in the face of more powerful rivals in the government.
Domestic wheat production plus wheat imports are probably the most crucial commodities to bureaucrats in the Ministry of Supply, which is charged with providing substantial amounts of cheap food-primarily wheat, but also sugar, rice, beans, etc. to all of Egypt and especially to Cairo. Efforts by MOA to reform wheat production have been resisted strongly by the Ministry of Supply for fear that such a change would diminish its ability to provide the supplies in the quantities and at the price the government feels is necessary to prevent social unrest. It is not merely a question of authority or power. If the reform led to a shortage or a price increase, the result could be a repetition of the food riots of January 1977, and it would most likely be the Ministry of Supply that would pay the political price.
The Ministry of Planning is charged with overseeing these various bureaucratic interests, primarily to formulate and execute Egypt's five-year plans. The Ministry of Planning is one bureaucratic holdover from the Nasserist era, a time of state dominance in the economy, indeed in all of Egyptian society. The nature of this organization is to plan, oversee and ensure performance of economic enterprises in short, to control. It is not interested in allowing the market to determine supply or prices. Prime Minister Ganzouri used to head up this ministry, not in order to oversee its gradual obsolescence but to assure its success in managing economic performance. Indeed, Ganzouri, who was minister of international cooperation until 1987, was previously considered to be the staunchest opponent of economic reform and privatization in Egypt. Today, he is touted as a born-again reformer.
Many people, inside and outside the Egyptian government, say that the answers to Egypt's problems are to be found in the private sector and in reform of the bloated public sector. While there may be a good deal of truth to these suggestions, the state will continue to be an important actor in economic decision making, as it is in virtually every society. Therefore, turning to the private sector as a panacea would be to ignore the equally important task of improving the capabilities of the public sector.
Bureaucrats in no society or organization relinquish power easily. Given the primacy of politics in the bureaucracy and in the various aid programs in Egypt, one hope for economic development may be found in administrative reform. This would entail either a complete overhaul, which might require a political revolution, or improvement m the managerial capabilities of existing bureaucratic structures36 (i.e., training bureaucrats or recruiting good managers).
There also may be hope in accepting the fact of power politics between bureaucracies and exploiting it to deal with the inefficiency that inhibits economic progress. Some ministries struggle to control crops and commodities even if it is irrational in an economic sense because this control may be the only power they have. They might be willing to use it to barter with another ministry to gain control over something they covet more. For instance, in a meeting between Egypt's minister of Industry and a USAID economist, the minister said that if the MOA “let me sell fertilizer at world prices, I'd give them [control over] cotton.”37 When an aide to Minister Wali heard this from AID officials, he said without hesitation, “We'll take it!” MOA officials did not know prior to this that the Ministry of Industry was even interested in such a deal. The competition between Egyptian ministries is so stiff that there is little discussion between them. At times it requires an outsider to act as a catalyst for change.
Both "reformists" and "gradualists," in various ministries and state-owned industries, have consistently said38 that Egypt can better use foreign aid to promote development through "good management." To the gradualists, this means enhancing government control through increased efficiency in operating state-run industries and services and in improving the government's overall planning apparatus and (especially) its ability to extract revenues from companies, farmers and other citizens. To the reformists, it means allowing the private sector an increased (but not total) role in the economy and recruiting into the bureaucracy a more diverse group of trained professionals:
Maybe we need good management. We have thousands of people who hold M.A.s and Ph.Ds. in agriculture in Egypt; but who has an M.A. or Ph.D. in agricultural management? Maybe two or three. How can we then prepare or choose who will lead us in agricultural development? All of our workers are sinking in papers. Where is the time to think, to develop projects? We suggest thousands of projects, but they are not well thought-out. Who will take the initiative to develop these? Where is the political will or even the ability to lead? Mafiish!39
Another Agriculture undersecretary and former director of an AID-funded development project echoes his colleague's concern for better management in the ministry while asking that AID fulfill its stated intentions:
AID brought a new idea into Egypt, which I hope it achieves, and that is to develop Egypt, instead of just helping to increase production. That [latter idea] was all the U.S. embassy thought was necessary. Now, AID realizes that it should help Egypt and all [developing countries] to stand on their own feet [to build institutional capacity]. Egypt must develop its own resources, but it needs effective leadership to do so. Otherwise, if Egypt just sits around and waits every year to get money from abroad, dependency will continue without development.40
In the ten years since these comments were first made, there has been little change in the attitudes of Egyptian officials on these two issues: their own need for better trained professionals throughout the bureaucracy and the desire to develop, initially with support from U.S. economic assistance but ultimately without it. The fear among many Egyptian officials is that Egypt will remain dependent, especially on the United States, having failed to utilize the enormous financial resources available to it year after year to build institutions through with trained Egyptians could rely on their own resources to achieve economic progress. Yet there is a commitment to improving their record on development, if only the politics of the aid program and their own bureaucratic rivalries could be transcended. Perhaps Egypt could put the billions of dollars of aid to better use if that aid were targeted less at demonstration projects and capital investments and more at promoting the human resources of the country.
This reform of the bureaucratic structure would require a major initiative on the part of numerous key figures in the Egyptian government, including President Mubarak and several current Cabinet members, especially Atef Obeid, Yusef Wali and Kamal Ganzouri.
USAID AND DEVELOPMENT
USAID set up its mission office in Cairo in 1975 to pursue its traditional goals, but when the funding grew dramatically in the late 1970s as a reward to Sadat for signing the Camp David accords and the Egyptian-Israeli peace treaty, AID's role went "beyond issues of equity, basic human needs, and the poor majority [because] the concerns of the poor can only be met within the framework of economic growth.”41 Through its experiences in Egypt and much of the Third World, USAID has chosen or been given increasing responsibilities. From 1975 to 1996 and beyond, USAID has been expected to fulfill the monumental task of assisting the GOE in rebuilding a war damaged economy; developing a modernized urban infrastructure (sewers, telephones, transportation, utilities, port facilities) supporting economic growth; promoting the private sector in a state-controlled economy, satisfying basic human needs in a society where the government has already done much to establish a far-reaching minimum; promoting a complete overhaul of the economy through drastically reforming foreign-exchange and interest rates, government procurement policies and monopolies, and massive subsidization of food and energy consumption; stabilizing population growth; protecting the environment and building democracy. A massive agenda, no matter how much money has been available.
In short, AID has undertaken the monumental task of reworking an entire economy (and political system?). And it has had the money to attempt it, more money than it has ever had to work with in any one country in so short a time. To spend such huge amounts on such radical change inevitably led not just to AID’s need to monitor the distribution of funds between a contracting third party and the recipient government, which is the theoretical and legal requirement; it led also to AID's desire to have a major voice in the implementation of the process – a voice that is supposed to be supervisory, not dictatorial.
By the mid-1980s, AID officials saw billions of dollars being spent in numerous and diverse economic and social fields with no significant overall impact on development. They became frustrated with the Egyptian policy climate. They also knew that certain elements of their own government were often undermining AID's efforts, usually by siding with the GOE in rejecting AID demands for reform and m lobbying Congress to turn the aid program into a cash transfer, as is done with Israel, instead of a largely project-funded program. This frustration led USAID to redefine its goals in a much broader context. By the early 1990s, these goals were economic reform, privatization and institutionalization.
Economic reform has long been on the agenda of AID-Egypt. But its officials have not been successful in talking the GOE into a comprehensive reform Package for a variety of reasons. Primarily, Egypt is of such strategic importance to U.S. interests in the Middle East that GOE officials have been able to convince Congress and the White House that drastic changes would lead to political instability. An object lesson was learned in January 1977, when Sadat attempted to end various food and other subsidies at the insistence of the IMF and food riots followed, along with several da1-s of uncertainty regarding the regime s stability. The subsidies were eventually restored.
The White House and the American embassy have often taken up the GOE's position, overriding their own AID mission, that political stability is primary and that Egypt should not be pushed too far, too fast. The White House (under presidents Carter, Reagan and Bush) has given this same message to the IMF time and again, forcing it to back down on its demands for economic reform.42
Egypt has sufficient political clout in Washington to fend off those who seek to press it too hard on economic reasons alone. This clout is manifested in the increasing competition between the AID mission office and the U.S. embassy in Cairo as these two entities of the State Department pursue often conflicting goals. AID focuses on what is economically rational and the U.S. embassy sees what is politically possible and supposedly best for continued Egyptian stability. As the political consistently wins out over the economic, AID loses.
Conflicting goals are primary causes of the failure of U.S. aid to Egypt to have more of an impact on development. With massive sums of aid available, far too many objectives are pursued simultaneously-often at odds with one another. AID continues to get caught up in internal American conflicts over how foreign aid should be spent. And it lacks the power to resist manipulations of the aid program by Congress, the White House, and the departments of Agriculture and Commerce. Different agencies want to use this program to promote differing goals: economic development, political stability and continued peace with Israel. Still others say the program should be geared toward promoting American business in Egypt and the developing world generally. The USDA, for example, would rather find markets for American farmers' products than help another country compete with them.
As a result of directives from USAID-Washington to apply U.S. assistance to specific "strategic objectives" (SOs), AID-Egypt presented its 1996 request for $815 million with the following SOs: improved macro-economic performance; increased private investment and trade; increased production, productivity and incomes in the agriculture sector; improved maternal and child health; reduced fertility; increased access to, and efficiency and reliability of, public utilities in urban target areas; adoption of water and air-protection practices; and strengthened democratic institutions.43 These eight SOs fit comfortably with the four primary objectives AID Administrator Atwood says AID will pursue globally: economic growth, population “stabilization”, environmental protection and the promotion of democracy. Whether all four of these and all eight SOs can be accomplished in Egypt under the current structure of AID is doubtful.
Bureaucratic-authoritarian regimes, well-developed politically although undemocratic, have had some success stories. In studies on Taiwan, South Korea, Brazil and other such states, various observers point up the competence, effectiveness and strength of the governments of these states in promoting their own growth and economic development.44 This is not to suggest, however, that authoritarianism is necessary for economic growth. Kaufman says that states run by non-authoritarian elites are just as able to develop economically; in fact, some authoritarian elites fail because they come to power with no economic strategy at all.45 Ajami, Waterbury and Aulas each discuss how Nasser and the Free Officers came to power in 1952 with no economic blueprint on how to effectively promote growth and development.46 Things seem not to have changed much since 1952; Egypt remains yet another example in which an authoritarian elite has failed to push its economy anywhere near self-sustaining growth. While the state elite is stable and strong, for the most part, it is far from effective in economic management.
Egyptian officials are not taking the lead in promoting development. Instead, the army, Islamist groups and other nonprofits, and some private businesses are promoting economic and social development by working outside the inefficient government and bureaucratic structures.
Regardless of their stated positions on the question of the need to reform the economic system, the bureaucrats and politicians in charge are resistant to change for fear of losing control, the source of their power. Even those considered "reformists" add their voices to those advocating "gradualism." The reformists want change, only gradually, so that they can adapt to the new situation and use the changes to maintain whatever power they can, even in the face of reform. By using the right language reform, privatization, open-door, free market-they can become supported by powerful foreign interests (the United States, the IMF, multinationals). Gradualists, who want even less reform, also feel it necessary to use the language of reform-with the qualifier that it is to be gradual, to placate these same foreign donors and investors while they continue to use their positions of power to resist any change at all.
While this struggle goes on at the upper levels of the Egyptian government (within the cabinet), the fundamental nature of bureaucracies seems to be assisting those who seek to avoid reform. Ayubi points out that administrative reform is unlikely, given bureaucrats' ability to resist it, short of revolution. And if “changes introduced are so fundamental and radical that they are more of a ‘revolution’ than ‘reform,’ then they can no longer be described as ‘administrative’”47 and are in fact political. The revolution in the Soviet Union, initiated by Mikhail Gorbachev initially as economic and administrative reform, offers further evidence for this theory.
Such sweeping political change could occur if Egypt’s economic crisis returns, allowing certain powerful individuals to reform the inefficient bureaucracy. This presupposes that change will come from within the existing structure, although this is hardly inevitable, as the political structure continues to be challenged from outside, most recently by a variety of Islamic groups. If such reform, pushed by leaders responding to crisis, does not come from within, it is nonetheless necessary, and the only other source of change lies outside the system.
In keeping with the tenor of the recommendations presented in the introduction, the following are offered regarding the AID program in Egypt.
1) Congress should move to reform USAID, not to dismantle or subsume it even further under the Department of State. Rather, AID should be given independent agency status. Only as a semi-autonomous entity can AID officials (in Egypt and elsewhere) begin to fend off the powerful American political and commercial forces that undermine its effectiveness as an aid-for-development agency.
2) AID officials in Egypt should focus their strategic objectives on a few key development areas: basic and higher education, health, local development (e.g., through NGOs and local governing structures), and perhaps private-sector development.
3) AID officials in Egypt should use resources to train Egyptians to take over development projects. With management training, Egyptians can learn to design, manage, implement and evaluate these projects.
4) A corollary: AID officials in Washington should limit the U.S. "presence" in Egypt by reducing the num6er of Americans and relying more on Egyptian staff, project managers, development planners and evaluators.
5) U.S. foreign assistance to Egypt should be divided into "political” aid and "economic" aid. Political aid can be the reward to the government for its continuing support for, and leadership in, the U.S.-sponsored Middle East peace process and other areas of U.S. national interest; economic aid can be aimed at target areas (which AID-Egypt already has begun to delineate) to help move Egyptians out of the desperate social and economic conditions they continue to endure despite, or perhaps because of, the billions of dollars of aid going to their government.
Dividing aid into two separate categories (or three, if military aid were to remain outside the "political" category) would drastically reduce, though not eliminate, the political manipulation of "economic" aid. The people of Egypt would benefit, as their local governments and grass-roots organizations would be better able to access aid projects, technical assistance, commodity imports, credit facilities or other development mechanisms they choose in concert with AID managers. The latter, trained development specialists, could focus their attention where they prefer-on economic development-and move beyond political entanglements.
U.S. foreign aid encouraged Egypt to make peace with Israel. It later served as a reward. Aid is no longer needed as a "carrot" to keep Egypt at peace with Israel even if it is required to bolster a government, however undemocratic, that supports American interests in a critical region of the world. More important, American aid is still necessary for a people with a strong affinity for U.S. leadership in the world, who delivered American officials when they promised prosperity for the peace Egyptians have made and will maintain.
1 See op-ed by Bob Dole, "To Help New Democracies, Cut Aid to Israel, 4 Others" The New York Times, January 16, 1990. Together, aid programs in Egypt and Israel consume over one-third of the entire U.S. foreign aid budget. In some years this figure has been as high as 40 percent.
2 Amy Kaslow, "Dole's Bombshell: Shift for Foreign Aid?" Christian Science Monitor, January 25, 1990, p. 1.
3 See the introduction to this volume for an elaboration of these calls for reform.
4 U.S. Department of State, "U.S. Egyptian Partnership for Economic Growth and Development: Fact Sheet," February 20, 1996 (mimeo). In addition to joint committees discussing economic policy, trade, investment, external finance, technology transfer, sustainable development, the environment, education and human-resource development, the partnership consists of a Presidents' Council of private-sector executives who meet twice a year to advise the two governments on ways to remove barriers to private-sector Growth and coordination.
5 President Mubarak spoke at a joint news conference with Vice President Al Gore in Cairo in March 1995. See "U.S. aid to Egypt ,may be reduced," Financial Times, March 21, 1995, p. 4.
6 Ted Clark, "U.S. Holds Back on Foreign Aid," National Public Radio, Weekend Edition, Sunday, June 23, 1996. Transcript 1181-10.
7 See op-ed by Roy Prosterman, "Egypt a Model for U.S. Aid to Other Lands," The Wall Street Journal, January 6, 1989; Denis J. Sullivan, "Bureaucratic Politics in Development Assistance: The Failure of American Aid in Egypt," Administration & Society, vol. 23, no. I (May 1991), pp. 29-53; William Schmidt, "A Deluge of Foreign Assistance Fails to Revive Egypt's Stricken Economy," The New York Times, October 17, 1993, p. 10; John Lancaster, "U.S. Aid has yet to lift most Egyptians," The Washington Post, April 5, 1995, p. Al.
8 In early 1995, AID had at least 40 active projects to manage in Egypt; over 95 projects had already been completed by that time.
9 Remarks of J. Brian Atwood at the Middle East Policy Council panel discussion "U.S. Development Assistance to the Middle East: Critical Perspectives," February 27, 1996 (see proceedings, p. 1).
10 World Development Report, 1984.
11 Egypt, Economist Intelligence Unit Country Report, 2nd Quarter 19%, p. 3.
12 The ratio of interest and principal payments due compared to export receipts for a given year.
13 Some of it is due to the quality of Egyptian products, the access to markets, and government policies and dominance of the economy.
14 "Report on Economic Conditions in Egypt, 1994-95". USAID, Cairo, February 1996, p. 4.
15 The official rate has varied from 9 to 11 percent (1993-1995) but most analysts favor the rate that is double what the government of Egypt claims. See “Report on Economic Conditions in Egypt, 1994-95.” USAID, Cairo, February 19%, p, 6.
16 Al-Ahram Weekly, December 10-16, 1992, p. 4.
17 Richard Adams, "Growth without Development in Rural Egypt: A Local-level Study of Institutional and Social Change." Ph.D. dissertation, University of California-Berkeley, 1981, p. 2.
18 This assessment of Ganzouri is based on interviews with AID and World Bank officials over the past 10 years.
19 See Dirk Vandewalle, "Egypt and its Western Creditors," Middle East Review, 20 (Spring 1988); Alan Richards, "The Political Economy of Dilatory Reform" (Cairo, 1990, mimeo); Hans Lofgren, "Economic Policy in Egypt: A Breakdown in Reform Resistance?" International Journal of Middle East Studies, vol. 25, no. 3 (August 1993); and Denis J. Sullivan, "The Political Economy of Reform in Egypt," International Journal of Middle East Studies, vol. 22, no. 3 August 1990).
20 Some of this data has been previously published and analyzed in two of my earlier works: "The Political Economy of Reform in Egypt," International Journal of Middle East Studies, 22, p. 3 (August 1990); and “Bureaucracy & Foreign Aid in Egypt: The Primacy of Politics,” in Ibrahim Oweiss (ed.) Political Economy of Contemporary Egypt. Washington, DC: Center for Contemporary Arab Studies, 1990.
21 See especially Samir Radwan, “ishtirakiyya 'am ra'sumaliyya” [Socialism or Capitalism?], alahram al-iqtisadi, October 11, 1984, for an assessment of the early arguments of this ongoing debate within Egypt.
22 See especially N. Ayubi, Bureaucracy and Politics in Contemporary Egypt, (Oxford University Press, 1980 ; M. Crozier, The Bureaucratic Phenomenon, University of Chicago Press, 1964).
23 Ayubi, 1980, p. 51.
24 Max Weber, The Theory of Social & Economic Organization, translated by A.R. Henderson and T. Parsons (London: William Hodge, 1947), p. 315.
25 Ayubi, 1980, p. 80.
26 Interview with head of non-governmental organization (NGO) in al-Minia, Egypt, October 28, 1986.
27 Interview with USAID official, Cairo, December 3, 1986.
28 See Robert Dahl (1957) "The Concept of Power,” Behavioral Science II (July 1957) pp. 201-215
29 Ayubi, 1980, p. 43.
30 Ibid, p. 38.
31 Notable exceptions to this norm include the consistently effective and efficient Suez Canal Authority as well as the High Dam Authority.
32 See Denis J. Sullivan, Private Voluntary Organizations in Egypt: Islamic Development, Private Initiative, and State Control (Gainesville: University of Florida Press, 1994).
33 These interests might be to use one's office to gain economic power, either by working a second Job in which this official can help his or her private employer by providing information available to him/her from his/her government position or by corruption, such as selling government licenses to a company hoping to import restricted merchandise.
34 "United States Economic Assistance to Egypt: Status Report," USAID, December 1994, p. 20.
35 Op. cit., Egypt, EIU, 1996, p. 26.
36 See Monte Palmer, Ali Leila and El Sayed Yassin, The Egyptian Bureaucracy (Syracuse University Press, 1988). Recommendations on education and training to reform the Egyptian bureaucracy are found in chapter 8.
37 These comments were related to me by someone present at the meeting.
38 Based on interviews conducted in 1986-87, 1990-91 and 1994.
39 “There is none.” Interview with MOA official, Cairo, November 4, 1986.
40 Interview with MOA official, Cairo, November 9, 1986.
41 U.S. House of Representatives, “U.S. Mission and Office Operations: Egypt,” Hearing before a subcommittee of the Committee on Government Operations, 96th Congress, February 11, 1980.
42 Interview with AID official on TDY [temporary duty] in Cairo October 15, 1986. See also Hamied Ansari, Egypt: The Stalled Society (Albany: SUNY Press, 1986), especially chapter 8.
43 FY96 Congressional Funding Request for USAID's Egypt Programs, USAID Web site; also, mimeo from AID.
44 See Richard Barrett and Martin Whyte, "Dependency Theory and Taiwan: Analysis of a Deviant Case," American Journal of Sociology, vol. 87 no. 5 (1982); John Boli-Bennett, "Global Integration and the Universal Increase of State Dominance, 1910-70," in Albert Bergesen, ed., Studies of the Modern World System (New York: Academic Press, 1980); Peter Evans, Dependent Development: The Alliance of Multinational, State and Local Capital in Brazil (Princeton University Press, 1979).
45 See Robert Kaufman, "Industrial Change & Authoritarian Rule in Latin America," in David Collier, ed., The New Authoritarianism in Latin America (Princeton University Press, 1979). Also see Jyotirindra das Gupta, "A Season of Caesars: Emergency Regimes and Development Politics in Asia, Asian Survey, 18 (1978), who points out that emergency regimes in Asia are not necessary for economic development given that their achievements do not justify their existence.
46 Fouad Ajami, The Arab Predicament (Cambridge University Press, 1981); John Waterbury, The Egypt of Nasser and Sadat (Princeton University Press, 1983); and Marie-Christine Aulas "State and Ideology in Republican Egypt," in State and Ideology in the Middle East and Pakistan, F. Halliday and H. Alavi, eds. (New York: Monthly Review Press, 1988).
47 Ayubi, 1980, p. 54.