Foreign Aid to Egypt Prior and Post the 2011 Revolution

Mona El-Sholkamy

Misr International University

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Abstract

Foreign aid is one of those topics that have provided ample room for discussion and controversy over the years. The world has had more than fifty years of experience of aid giving and receiving in the post-war era. This experience has enriched our knowledge not only about aid -- a broad subject with numerous interrelated issues -- but also about the entire development process foreign aid supposedly seeks to accelerate. Hundreds of billions of foreign aid dollars have been designated to developing countries and hundreds of billions more will be provided in the next few years. For the past years, U.S. foreign aid has been judged by its intentions, not its results. Foreign aid programs have been perpetuated and expanded not because they have succeeded, but because giving foreign aid still seems like a good idea. But foreign aid has rarely done anything that countries could not have done for themselves. Furthermore, it has often encouraged the recipient governments' worst tendencies--helping to underwrite programs and policies that have starved thousands of people and derailed struggling economies.
Given this, the question now is how much foreign aid is enough. How much do we really need as an economy at this stage of our development? What type of aid is most effective? Is more aid necessarily better?
Implied in these questions is that the amount and mix of foreign aid depends largely on the economic conditions of the recipient country concerned. Egypt has been a long-term recipient of foreign aid from a multiplicity of sources and in a variety of forms. The US aid has been the dominant component in terms of magnitude and coverage, although other sources, including the European Union, have not been insubstantial. However, and despite such remarkable influxes of aid, Egypt has (and still is) consistently suffered from the mismanagement of its reservoir of foreign assistance, alongside its deprivation of the fruits the latter always promises.
This study focuses on the failure of U.S. foreign aid to Egypt to achieve its goals. It begins with a close examination of analyzing the reasons behind the mismanagement of such foreign assistance to Egypt before the 2011 revolution. Consequently, a review of some of the possible solutions for such shortcomings will be provided, along with a representation of Egypt’s post-revolution aid objectives. U.S. aid's achievements in Egypt will be referred to for comparative purposes. The study concludes with a list of recommendations to overcome such reasons of failure.
Keywords

Foreign aid management, corruption, sustainable development, capacity building, aid transparency, fragmentation, selectivity, beneficiaries, bilateral and multilateral aid, tied aid, aid predictability, aid accountability, Egyptian 2011 revolution, foreign debt.
Summary

Egypt has for long faced formidable development challenges in a variety of fields, particularly since the 1980s. Back then, it was just like many other economies, just embarking on a huge reform program, (the ERSAP-Economic Reform and Structural Adjustment Program), it needed assistance in many fields, whether in the economic sector or in areas of technical knowledge. Nevertheless, Egypt’s economic performance never really portrayed a mirror-image of the considerable inflow of aid it received. Together with management malpractices, corruption and lack of transparency allowed room for the misuse and ineffective channeling of aid coming to Egypt. At the wake of the 2011 revolution, foreign aid, particularly US assistance, has starred as the most controversial topic in the realm of development and reconstruction planning. New development and rebuilding objectives were set down for the country, yet with even more novel terms and conditions to achieve them. Despite the traditional challenges and obstacles that for long hindered the aid-development schemes prior to the 2011 revolution, other difficulties have emerged that resemble no less hindrance.
History

The United States has provided significant military and economic assistance to Egypt since the 1970s. U.S. policy makers have constantly justified aid to Egypt as an investment in regional stability, built primarily on long-running military cooperation. In addition to the latter, a major objective was to build a modern infrastructure after years of neglect, compounded by increasing population pressure and an ailing economy. More and better hospitals, schools, highways, airports and other infrastructure requirements were urgently needed to translate reform decisions into realities. Without foreign aid, Egypt would have either proceeded at a much slower pace or incurred heavy debts that would have taxed its future revenues to the limit. Besides infrastructure, Egypt also had to obtain more food -- especially wheat and other vital commodities -- to fill the gap between local supply and rising demand. So, there is no doubt that foreign aid was instrumental in helping to put Egypt on a faster development track. While there is still work to be done in modernizing and completing Egypt’s infrastructure, priorities in recent years have shifted to other concerns. Emphasis is now more focused on such domains as accelerating reform via privatization, opening our markets to imports, building a technology base to modernize our sagging industrial structure and strengthening educational and training institutions.
Results

Due to the mismanagement of foreign aid, whether from the United States, or any other donor country for that matter, the consequences could be presented as follows: ← Fragmentation of foreign assistance: Too many donors in one country / sector or, too many different projects. This unfortunately jeopardizes the fruits of specialization, leading eventually to serious waste of time, effort, and costs. Consequently, aid does not reach its target beneficiaries. ← Poor Selectivity: Avoiding aid to non-poor countries at the expense of really poor ones! ← Ineffective Aid Channels: Aid given in manipulative ways. ← Ratio of Overheads to Aid exceed reasonable standards.
Solutions

1. Building Trust!
a. Maintain clear & regular Communications with grant officers.

2. Observe project start & end dates for spending.
a. Avoid making payments before the agreed contract start date.

3. Meet project targets within Budget.
a. Synergy between activities in project proposal and actual activities carried out.
b. Hold regular meetings with staff to discuss donor’s conditions & review progress plans agreed with donor.

4. Avoid under-spending.
a. If you do not use up all of donor’s money, donors may not allocate the same amount next year.

5. Monitor donor-by-donor expenditure.
a. In multi-donor funded projects, monitor individual expenditure allocated by each to avoid over-or-under spending. Total expenditure may conceal how the money of each donor was spent.

6. Spend Capital Equipment budgets early.
a. Equipment should be bought in the first half of the project. Donors do not allow this to occur towards the end to avoid extension-requests.

7. Make time to prepare donor reports.
a. Putting a financial report together always takes longer than you think! Financial data often needs to be collected from very busy project managers!

8. Reports must be complete and accurate.
a. Make sure all expenditure is reported in the correct period. If necessary, any adjusted figures should be clearly verified.

9. Keep clear contract files & budget notes.
a. Put dates and notes on all papers relating to the grant.This will clarify old from new versions of the contract, budget, and any agreements with donor.