U.S. Congress Weighs Aid Package to Post-Mubarak Egypt

  • by David Elkins (washington)
  • Inter Press Service

Within the next month, members of Congress will propose a bill to provide capital to small- and medium-sized enterprises in Egypt and encourage additional FDI in the country's private sector. But, analysts point out, private investment is only one of many components critical for a robust transition to lasting, democratic governance in the country.

If enacted, the bill would symbolise a strong U.S. commitment to tackle the most serious economic problems facing Egypt, such as high unemployment levels - reaching upwards of 30 percent for Egyptian youth - and spurring long-term economic growth for Egypt, the most populous country in the region.

'[D]espite the region's bounty of oil and natural gas, wealth has trickled down to too few - and the population is booming,' Senator John Kerry, chairperson of the Senate Foreign Relations Committee, said at a conference on Wednesday.

'Millions of jobs are needed every year just to keep pace with the influx of new workers,' he added. 'But many have few job prospects, and many more have serious concerns about how to provide for their families.'

Meanwhile, Secretary of State Hillary Clinton, while visiting Cairo on Wednesday, pledged 90 million dollars in immediate economic assistance to Egypt and outlined the Overseas Private Investment Corporation's (OPIC) plan to make available two billion dollars for private sector investment.

'[P]rivate capital investment is essential for security, stability, growth and job creation in the Middle East and North Africa,' OPIC President and CEO Katherine Littlefield, who accompanied Clinton on the trip, said Wednesday.

'By catalysing investments in small and medium enterprises, infrastructure, and other key sectors, OPIC hopes to bolster the private sector's role in helping to transform the region,' Littlefield continued.

However, critics of broad liberalisation reforms argue that programmes such as those planned for Egypt must avoid the pitfalls of creating more income disparity that have, historically, followed sweeping economic reforms initiated by Western countries and development organisations.

'The problem for the U.S. is that it wants liberal economic reform - decreasing the state enterprises, privatisation etc… These reforms have led to increasing inequality,' Marina Ottoway, director of the Middle East Programme at the Carnegie Endowment for International Peace, told IPS.

In the early 1990s, then president Hosni Mubarak adopted a series of International Monetary Fund reform programmes based on free-market principles and privatisation — a plan for liberalisation with good intentions that instead, some analysts say, resulted in select groups within Egyptian society benefiting from windfalls and ingrained inequitable wealth distributions into the Egyptian economic system.

Experts like Ottoway argue that these earlier reforms exacerbated middle class disillusionment and contributed to popular grievances with the Egyptian government, hastening Mubarak's abdication on Feb. 11.

'The discontent of the protesters was related to the economic reforms [in 1991],' Ottoway explained.

After years of economic and democracy promotion assistance from the U.S. and other international institutions, it is unclear whether programmes planned for Egypt's economic recovery in the coming months will elicit similar outcomes.

The enterprise funds, co-sponsored by Senators Kerry, John McCain and Joe Lieberman, will focus on private investment that will, in theory, help to reduce the large unemployment levels in Egypt's population of over 80 million.

But unlike the aid packages for Eastern European countries after the fall of the Soviet Union, Egypt has been a partner of the U.S. for years, and regional observers say it would be misleading to apply the indicators of success of such assistance packages to those proposed for Egypt and other countries in the Middle East.

'I'm somewhat sceptical of [the] enterprise fund,' Ottoway told IPS. 'There are no magic bullets…This is not Eastern Europe where in fact you did not have a private sector. Egypt has an enormous private sector. You go to Cairo and there are small businesses everywhere.'

Policy makers from the U.S. and the European Union are also exploring other means to encourage economic stabilisation and growth in Egypt, such as a U.S.-Egyptian free trade agreement and reducing Egypt's debt burden.

'[W]e can help encourage intra-regional trade and integration in a region in which both are in short supply,' Undersecretary of State for Political Affairs Bill Burns said in a Congressional hearing on Thursday.

'We can help produce private sector jobs desperately needed to keep pace with demography and expectations. And we can help spread the benefits and opportunities of economic growth across Arab societies, rather than just to a narrow circle at the top,' Burns added.

Before Clinton's meeting with Egyptian Foreign Minister Nabil al-Araby on Tuesday, she acknowledged the many hurdles that lay ahead in forging a comprehensive relationship with a new government in Cairo.

'I came to listen more than talk,' she said. 'I wanted to hear directly about the needs that Egypt has, particularly economically, because we know that political reform must be matched by economic reform - that there must be jobs and rising incomes and opportunities for all.'

Budget battles over U.S. foreign aid have intensified in recent months, forcing compromise between both Democratic and Republican Congressmen who consider assistance packages that advance economic and political reform abroad to be in the interest of national security and those who are more sceptical.

'We can either pay now to help brave people build a better future for themselves, which we have promised and talked about for years, or we will certainly pay later with increased threats to our own national security,' Senator Kerry argued.

© Inter Press Service (2011) — All Rights ReservedOriginal source: Inter Press Service