24 - 30 January 2002
Issue No.570
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Al-Ahram Weekly Online 24 - 30 January 2002 Issue No.570 |
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Improving aid prospects
USAID Administrator Andrew Natsios, who is in charge of overseeing the US's economic assistance programmes worldwide, stopped in Cairo last week as Egypt garnered increasing international support for the economy. He spoke exclusively to Aziza Sami
As the Egyptian government grapples to deal with the revenue shortfall resulting from the 11 September attacks on the US, it has not hesitated to turn to its largest donor for support.
Andrew Natsios
Promptly following the attacks, consultations at the presidential level took place between Egypt and the US. An agreement was reached to speedily pump approximately $1 billion from the US Agency for International Development (USAID) funds into the economy. Disbursed from existing economic programmes valued at $579 million, the aim of this assistance was announced as "helping support the government's economic reform programme." An additional $380 million would also be disbursed over the first few months of 2002 to help private sector importers, through the Commodity Import Programme(CIP). The latter extends credit for the purchase of US imports, to be repaid in local currency.
USAID administrator Andrew Natsios, who was appointed to his position by the Bush Administration in May, 2001, stopped in Cairo last week on his way from Jordan. The next leg of his trip takes him to Kyoto, Japan, to attend the donors' conference for the reconstruction of Afghanistan. Speaking to Al-Ahram Weekly, Natsios said that USAID would play a positive role at the World Bank's Consultative Group meeting in Sharm El- Sheikh bringing together 37 donors who would pledge commitments to the Egyptian economy.
"That conference will be important for USAID to focus the attention of other donors who may have neglected their aid levels to Egypt, which is something we do want to encourage," Natsios said. "Egypt is the largest Arab country, and one of the largest Muslim countries, and so it is very important. We are aware of the recession here, (and how, like other economies, it has been affected by the US economy). There is good news though, that in the past three weeks there has been a rise in consumer confidence, to the pre- September levels. We may have an earlier recovery than we expected, which would be good news for Egypt."
Asked where -- apart from the $380 million directed to support importers -- the additional $579 million would be directed, Natsios responded, "I think that an agreement has been reached in this regard, but I will leave it to our mission director or our ambassador to explain exactly what those negotiations involved." Natsios also addressed the question of whether, in the disbursal of this sum, there was the usual pre- condition of implementing further liberalisation measures which accompanies several USAID programmes.
"There are no new conditions," he responded. "But there have been broad discussions with the Egyptian government concerning policy reforms in a number of areas (such as education)," he said, referring to a pilot project in education taking place in Alexandria. The project's objective is to introduce new administrative, management and teaching methods, as well as promote, through practical means, the "school to work" motto.
"[Other than that], I don't know if new things were raised during these negotiations, but there were a variety of liberalisation issues that have been under discussion for sometime now".
Privatisation measures over the past two years had slowed down, with political constraints impeding the liberalisation of sectors deemed important by USAID, such as utilities. Asked how this would impact upon USAID programmes in the coming phase, Natsios says "That there are still a number of issues in terms of privatisation that we continue to be interested in. But the Egyptian government has to make those decisions. I already held talks with Prime Minister Atef Ebeid, but I don't like to disclose the details, because that is his job. I thought , though, that they were very useful conversations, and both governments have high expectations of success in some of those areas". The White House had recently expressed support for the Egyptian economy, with USAID mission director in Egypt Willard Pearson also commending what he had described as "the very important steps recently undertaken on the exchange rate."
Over the past four years, US economic assistance to Egypt has witnessed a five per cent annual reduction, with policies working towards replacing the diminishing aid component with trade and investment- under the "aid to trade" motto. Nevertheless, global economic conditions, coupled with regional tensions in the Middle East had resulted in the deferral of US investors from coming more heavily into the Egyptian market. The balance of trade between the two countries also remains predominantly tilted in favour of the US. Given these conditions, Natsios reflects on the prospects for the "aid to trade", saying, "Egypt's trade deficit is not just with the US, but in the balance of trade generally. Of course, this has been exacerbated by the drop in tourist revenues since 11 September. I hope that this is changing with Americans returning to travelling. Many of them are not cancelling their spring and summer vacations." He added, "The immediate-term problem of the balance of payments may be dealt with if the tourist industry returns. But as regards the longer-term structural issues , when any country has high consumption rates not met with as equally high investment rates (which is of concern to us even within the US), then policies can turn to focus, (as they did in the US) on investment in public infrastructure, and capital investment in private business. We would urge policies to be adopted that would have this effect."
On whether he thought the current policies adopted by the Egyptian government were tackling the underlying structural problems which have put constraints on private funding, Natsios responded, "I don't know in each specific area what is the status of each area of potential reform. I discussed some of these areas with the prime minister who is familiar with these issues in a very detailed way. Some of these reforms have gone through, and some have yet to be implemented." He said he assessed that USAID's CIP programme "is very favoured by businesses especially in start-ups and in purchasing materials helping them improve their competitiveness. There is a lot of evidence that there was a dramatic increase in Egyptian exports when this programme was under way".
Asked how he thought trade and investment between Egypt and the US would be negotiated in the absence of the US-Egypt Partnership, (comprised of joint- committees diverting USAID funds towards the promotion of trade and investment in different sectors) which had been disbanded soon after the Bush Administration's accession. Natsios said, "These councils, which were established around the world, caused some serious coordination problems with our government. I don't know about the Egypt model, but (elsewhere) we would establish a programme in one area, say education, and then the department of education in Washington would then establish another programme. The problems of coordination among a dozen federal departments in Washington which confused our partners in the developing world were enormous and caused some really serious problems for us. Now," Natsios continued " most federal agencies are saying: leave it to AID. We have the lead. President Bush and Secretary of State Colin Powell have made it clear to the rest of the cabinet that the foreign assistance programme in the US is run through USAID." Close interaction between USAID and the Egyptian private sector would now be "through chambers of commerce, small and medium enterprise loan programmes, ministries and NGO's".
Natsios, who has a particular interest in agriculture and food security issues, said that he estimated that the liberalisation measures undertaken in Egypt's agricultural sector, mainly through the liberalisation of prices, were successful.
"The agricultural reform initiated by Agriculture Minister Wali for twenty years, through the liberalisation of pricing, are now proving that reforms do lead to much higher levels of production, lower prices, higher export levels and the substantial increases which have occurred in family income." However, in response to a question on the current debilitating problems facing Egyptian exports (as a result of global conditions, exacerbated by the lack of coordination between production and marketing strategies in the Egyptian agricultural sector), Natsios said, "Yes, there are problems, and those are the issues that we continue to work on, with the Egyptian government."
On why- despite the substantial levels of aid not only from the US but from other countries -- Egypt has not attained the status of a newly industrialised country like South Korea, Natsios responded, "Egypt today is a profoundly different country than it was nineteen years ago when I came here. I remember staring out of my hotel window then, and there were very few electric lights in the city. When I look out now, the whole city is lit up. More people live in apartments and have electric lights. There is a middle class in Egypt, whereas there was not a very big one twenty years ago. Even though you might not see it, I see it. I think you are headed towards South Korea. As well, a lot depends on the speed with which reforms pass through, because the countries which have undertaken reform, have moved (forward) more rapidly."
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